Highlights of the New Tax Slabs, Rebates, and Other Tax Reforms in Budget 2023

One of the most talked about and welcomed parts of the Union Budget 2023–24 was the amendments in the personal income tax announced by the Hon’ble Finance Minister. However, the question that lingers in every taxpayer’s mind is which tax regime is better: the new or the old one. People wish to know which tax regime they should opt for while filing their ITR. As per Union Budget 2023, the new tax regime is the default one, but taxpayers have the option to choose the old regime too.

What are income tax slabs?

The income tax slabs are the tranches that highlight what tax percentage people have to pay based on their income level. Depending on income, there are various tranches to abide by while filing the income tax return.

New vs old income tax slabs: a comparison

Here are the income tax slabs for taxpayers below the age of 60 per the old and the new tax regimes.

Tax rate	Old income slab (in INR)	New income slab (in INR)
NIL	Up to 2.5 lakh	Up to 3 lakh
5%	< 2.5 lakh and ≥ 5 lakh	< 3 lakh and ≥ 6 lakh
10%	< 5 lakh and ≥ 7.5 lakh	< 6 lakh and ≥ 9 lakh
15%	< 7.5 lakh and ≥ 10 lakh	< 9 lakh and ≥ 12 lakh
20%	< 10 lakh and ≥ 12.5 lakh	< 12 lakh and ≥ 15 lakh
25%	< 12.5 lakh and ≥ 15 lakh	–
30%	Above 15 lakh	Above 15 lakh

Here are the income tax slabs for senior citizens (aged 60 years and above) and super senior citizens (aged 80 years and above). The tax slabs for these categories are the same in the old and the new tax regimes.

Tax rate	Income slab (in INR) for senior citizens (60–80 years)	Income slab (in INR) for super senior citizens (80 years and above)
NIL	Up to 3 lakh	Up to 5 lakh
5%	< 3 lakh and ≥ 5 lakh	–
20%	< 5 lakh and ≥ 10 lakh	< 5 lakh and ≥ 10 lakh
30%	Above 10 lakh	Above 10 lakh

Corporate taxes

Corporate taxes in India are categorised based on whether a company is domestic or foreign. Domestic companies are further classified based on their threshold turnover of INR 250 crore and net income of between INR 1 crore and 10 crore. The effect of Net Income shows in the applicable surcharge.

The following table elaborates on the corporate tax structure for domestic and foreign companies in the country based on the new tax regime.

Company type	Tax rate	Surcharge on net income of <=INR 1 Cr	Surcharge on net income of INR 1–10 Cr	Surcharge on net income of >INR 10 Cr
Domestic company with annual turnover <=INR 250 Cr	25%	Nil	7%	12%
Domestic company with turnover >INR 250 Cr	30%	Nil	7%	12%
Foreign Company	40%	Nil	2%	5%

Apart from the aforementioned tax rates, under Section 139 (1) of the Income Tax Act, companies can carry forward their losses for 8 years succeeding the year in which the loss was incurred.

What should you opt for—the new or the old regime?

Coming back to the Union Budget tax highlights, a major announcement was the income tax rebate limit increase from INR 5,00,000 to INR 7,00,000. This is as per Section 87A of the Income Tax Act. The notable point is that the announcement is about income tax rebate, not income tax exemption.

This move benefits taxpayers whose taxable income is up to INR 7 lakh. They stand a chance to get a full rebate on their income tax.

For taxpayers whose taxable income is more than INR 7 lakh, taxes are liable as per the slabs mentioned in the table above.
The current mindset of taxpayers regarding the income tax rebate announcement remains unclear. They should make a choice between the two tax regimes based on how the tax is calculated under them.

Here is an example considering three income scenarios and calculating the taxes in the old and the new tax regimes:

1. Income of INR 7,00,000
2. Income of INR 10,00,000
3. Income of INR 15,00,000

Conclusion

To sum up, the primary thing a taxpayer should consider before selecting the regime while filing ITR is that deductions were allowed in the previous regime but are not allowed in the new regime. Furthermore, in the new tax regime announced in the Budget 2023-24, a standard deduction of INR 50,000 is allowed under Section 80 CCD (2) of the Income Tax Act, 1961. 

FAQs

1. My Income is INR 7,50,000. Am I applicable for the tax rebate?

To get a tax rebate per the new tax regime, your total income should be up to INR 7,00,000. As soon as your income crosses this figure, you are required to pay tax as per your respective income slab. Also, you will have to pay the tax on your entire income and not only the extra income over and above the threshold of INR 7,00,000.

2. What is the maximum income level at which individuals below 60 years can get full tax exemption?

In Budget 2023, the tax slabs have been revised. The new slab level is at INR 3,00,000 and above. Thus, the maximum income level at which individuals below 60 can get a full exemption is INR 3,00,000. Any income above INR 300,000 will come under the tax rates set as per the slab.

3. Has there been any change in tax slabs for senior citizens (60–80 years) and super senior citizens (80 years and above)?

There has been no change in the tax slabs for both senior and super senior citizens. Both the old slabs and new slabs are the same.

4. For individuals below 60 years, is there any slab the same as the old one? If yes, then which one?

As per the new slabs proposed in Budget 2023, there has been a change in the slab levels as well as the tax rates for income level up to INR 15,00,000 lakh. However, for individuals with income above INR 15,00,000, the tax slab is maintained at 30%.

5. In the content of the new tax regime announced in the Budget 2023, are there any major changes in the context of deductions?

In the new tax regime announced in Budget 2023, the threshold income for a 100% rebate has been increased from INR 5,00,000 to INR 7,00,000. There has also been the introduction of a standard deduction (INR 50,000) for tax calculation purposes. Taxpayers can use this deduction while calculating the tax as per the new regime.