Income Tax Rates and Slabs
Every year, the finance minister announces income tax slabs in India. There are now two separate Income Tax regimes. Tax breaks are no longer available under the new regime. Tax breaks were available to taxpayers under the previous administration.
Nirmala Sitharaman, the finance minister, announced the Union Budget for 2022 on February 1, 2022. The current income tax slabs and rates are not being changed in the latest budget.
What exactly is the Income Tax Slab?
Individual taxpayers will be required to pay income tax based on the slab system into which they fall. Individuals may fall into a different tax bracket depending on their income. As a result, people with greater incomes will have to pay more taxes. The slab system was implemented to keep the country’s tax system equitable. The slabs are subject to change with each budget announcement.
Things to Consider Before Choosing the New Tax Slab
There are a few factors you should consider before opting for the new tax bracket:
- If you are an individual or a member of a Hindu Undivided Family (HUF) and do not have any business income, you can exercise the option on or before each prior year.
- If you choose the next tax regime as your option as a taxpayer, you cannot modify it during the year. If you withdraw your selection for the next tax regime and return to the previous tax regime, you can choose the new tax regime again throughout the fiscal year.
Consider the following —
- According to the former tax regime for fiscal years 2021 and 2022, super senior adults (aged 80 and older) are eligible for an income tax exemption of up to 5 lakhs.
- Individuals will also be subject to a 4% health and education cess, which will be applied to the tax computed above.
- There is a surcharge that applies to all types of individuals whose income exceeds the following level –
- 50 lakhs – ten per cent of income tax
- 1 crore – 15% of income tax
- 2 crore – 25% of income tax
- 5 crore – 37 percent income tax
Individual taxpayers have the option of using either the pre-existing tax regime or the new tax regime. If they choose the latter, they will have to forego a set of exemptions and deductions available under the Old Tax regime. There are a total of 70 exemptions and deductions available under the Old Tax regime but not under the New Tax regime. Some of the more popular ones have been included here –
- Children education allowance
- Conveyance allowance
- Expenses incurred on a daily basis when working
- Deduction under Chapter VI-A (80C, 80D, 80E, and so forth) (excluding Section 80CCD(2))
- Allowance for helpers
- Allowance for House Rent (HRA)
- Interest on a mortgage (Section 24)
- Allowance for Leave Travel (LTA)
- Other special considerations
Income tax laws might be difficult to understand. Individuals should be better able to grasp income tax slabs after reading this text. They may now make educated decisions about whether to continue using the Old or New Tax regimes.