Union Budget 2022-23: Income tax slab system means different tax rates are prescribed for different ranges of income and tax rates keep increasing with an increase in the income of the taxpayer
The Union Budget 2022-2023 will be presented in Parliament on 1 February, 2022 by the Union Finance Minister Nirmala Sitharaman. The taxpayers, like every year, are eagerly waiting for the budget announcements related to income tax slabs.
Currently, individual taxpayers can be divided into three categories:
- Individuals, who are below 60 years of age. This category includes both residents and non-residents
- Resident senior citizens, who are 60 years old or older but below 80 years of age
- Resident super senior citizens who are above 80 years of age
While you await the Budget announcements related to income tax, here are some details about the current tax slabs:
Income tax levies tax on individual taxpayers on the basis of a slab system. Slab system means different tax rates are prescribed for different ranges of income. It means the tax rates keep increasing with an increase in the income of the taxpayer. This type of taxation enables progressive and fair tax systems in the country.
In the last budget, there were no changes in income tax slabs by the Central government. However, in the year before last Budget, a new tax structure was introduced by the finance minister.
New Tax Regime
In the new structure, a person can pay tax at lower rates, but has to forego deductions. Under the old tax regime, people can continue to pay tax under the existing tax laws, while claiming any exemptions that are applicable to them.
Under the new tax system, there are seven income slabs available.
- An individual with an annual income of up to Rs 2.5 lakh is exempted from the tax bracket.
- Individuals earning between Rs 2.5-5 lakh yearly, have to pay 5 percent on their income.
- People earning between Rs 5 lakh and Rs 7.5 lakh, have to pay 10 percent on their income.
- Individuals whose income is between Rs 7.5 lakh and Rs 10 lakh per annum, need to 15 percent tax on their income
- Those earning between Rs 10 lakh and 12.5 lakh, need to pay 20 percent on their income
- Whereas, those earning between Rs 12.5 lakh and Rs 15 lakh, have to pay 25 percent on their income.
- Individuals who earn more than Rs 15 lakh, have to pay 30 percent tax on the income.
Section 80C exemptions are not possible under this framework. The new tax regime also excludes home loan exemptions, insurance exemptions and standard deductions.
Old Tax Regime
As per the old structure:
- Individuals whose total income is less than Rs 2.25 lakh don’t need to pay an income tax.
- Those who fall under Rs 2.5-5 lakh slab, have to pay 5 percent income tax on the income
- If an individual’s earning is between Rs 5 lakh to Rs 10 lakh, he has to pay 20 percent tax on the income.
- Those earning more than Rs 10 lakh need to pay 30 percent tax on the income