Home | General Finance | Income Tax Calculation FY 2022-23 | Old Vs New Income Tax Slabs for FY 2022-23 – Which one is Beneficial for You?

Income Tax Calculation FY 2022-23 | Old Vs New Income Tax Slabs for FY 2022-23 – Which one is Beneficial for You?

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income tax calculation fy 2020-21

The new income tax calculations were announced with the new budget on 1st February by FM Sitharaman. According to the new budget, individual taxpayers can switch back and forth between the new tax regime and the old structure. The Central Board of Direct Taxes Chairman, PC Mody says that the new tax regime offers lower slabs without exemptions. Therefore, as an individual tax payer, if you opt for the new structure, you have to forego all tax breaks under this scheme to avail the reduced tax rates. Salaried individuals can switch between the old and the new structure.

This has no doubt created confusion amongst taxpayers. Some people believe that the new tax structure is only beneficial to certain taxpayers whereas others say that this is creating more confusion in the computation of taxes. In this article, we will highlight and discuss in detail the new income tax guidelines for the FY 2021-22 and also do a mock calculation of taxes with both the old and the new structure to show which one is finally beneficial for you.

Not for Businessmen

The new tax structure is not optional for persons with a business. According to Chairman PC Mody, the tax breaks and exemptions will be gradually phased out to make the computation easier and more transparent. The government is also planning to introduce pre-filled income tax return forms to make them more efficient and compliant.

New Income Tax Slabs for FY2022-23

In the new income tax structure, some income tax slabs have been lowered if one foregoes exemptions and breaks. This is optional and to help you make an informed decision we are going to take a look at what income tax rates will continue and which ones are lowered if you forego exemptions.

As a taxpayer, you have two options available:

  1. New Income Tax Structure – Forego all exemptions and breaks and avail lower tax rates
  2. Old Income Tax Structure – At the existing income tax rates, benefit from the exemptions and tax breaks.

Income Tax Slabs for FY2022-23 (AY2023-24)

Taxable Income (Rs.)

Existing Tax Rate

New Tax Rate*

Up to ₹2.5 Lakh

Nil

Nil

₹2.5 – ₹5 Lakh

5%

5%

₹5 – ₹7.5 Lakh

20%

10%

₹7.5 – ₹10 Lakh

20%

15%

₹10 – ₹12.5 Lakh

30%

20%

₹12.5 – ₹15 Lakh

30%

25%

₹15 Lakh and above

30%

30%

*All exemptions and breaks have to be foregone to avail these tax rates

*For tax payers below the age of 60 years

Tax Deductions and Exemptions not allowed in the new tax structure

  1. Section 80C – The most popular tax deduction under Section 80C of up to ₹1.5 Lakh is not applicable in the new tax structure. This means that any profits made from investments such as Life Insurance, PPF, School tuition fees, ELSS, PF etc. is not applicable. However, one can still claim deduction under Section 80CCD for employer contribution to the employee NPS.
  2. Section 80D – Tax exemption under section 80D which allows for deduction for medical insurance premium and preventive health checkup is also not allowed.
  3. LTA – Leave Travel Allowance exemption which is given to salaried individuals twice a year in a period of four years is also not allowed.
  4. HRA – HRA or House Rent Allowance is a house rent limit provided by the employer to the employee for renting a house. In the old tax structure, one could claim a deduction up to a certain limit, but in the new tax structure it is not allowed.
  5. Standard Deduction – A standard deduction of ₹50,000 was initially available to salaried individuals. This is not permitted in the new tax structure.
  6. Section 80TTA – Section 80TTA provides an exemption of up to ₹10,000 on income generated from interest earned. This is not allowed in the new tax regime.
  7. Section 80DDB – Section 80DDB provides benefits for disability up to ₹40,000. This is also not allowed in the new tax structure in case you were planning to switch over.
  8. Section 80E – Section 80E allows for a tax break on the interest paid for education loans. This is also not permitted in the new structure.
  9. Section 80G – Section 80G which concerns donations, says that one can claim a deduction of the equivalent amount made towards a donation. This also cannot be claimed in the new tax structure.
  10. Section 24 – Section 24 for a Home Loan Interest allowed an individual to claim a tax deduction on the interest paid on a home loan up to an amount of ₹200,000. This benefit is also not available to you if you go for the new tax slabs.

Income Tax Calculation FY2022-23 (AY2023-24)

Let us take a look at the actual numbers by calculating taxes and comparing both tax structures. Please note that these are based on assumptions as several items in the new tax structure require further clarification. In this case, we are assuming that all tax deductions, exemptions, and breaks will be removed from the new tax structure.

Case 1

Salaried Individual Filing for Income Tax of up to ₹7.5 Lakh Income

Particulars

Old Tax Structure

New Tax Structure

Gross Salary (Without HRA and LTC)

₹750000

₹750000

Less: Standard Deduction Under Section 16

-₹50,000

Income Under Head Salaries

₹700000

₹750000

Less: Deduction on Home Loan Interested Under Section 24

-₹200000

Less: Tax on employment under Section 16

-₹2400

Income Under Head Salaries

₹497600

₹750000

Less: Deduction Under Section 80C

-₹150000

Less: Deduction Under Section 80D

-₹50000

Less: NPS Contribution Under Section 80CCD

-₹50000

Total Income:

₹247600

₹750000

Income Tax Slab

Old Tax Rate

Income Tax to Be Paid

New Tax Rate

Income Tax to Be Paid

Taxable Income

 

₹247600

 

₹750000

Up to 2.5 Lakh

Nil

 

Nil

 

2.5 – 5 Lakh

5%

 

5%

 

5 – 7.5 Lakh

20%

 

10%

 

7.5 – 10 Lakh

20%

 

15%

 

10 – 12.5 Lakh

30%

 

20%

 

12.5 – 15 Lakh

30%

 

25%

 

15 Lakh and above

30%

 

30%

 

Total Income Tax to be Paid

 

₹0

 

₹37,500

Case 2

Salaried Individual Filling for Income Tax for ₹20 Lakh Income

Particulars

Old Tax Structure

New Tax Structure

Gross Salary (Without HRA and LTC)

₹2,000,000

₹2,000,000

Less: Standard Deduction Under Section 16

-₹50,000

Income Under Head Salaries

₹1,950,000

₹2,000,000

Less: Deduction on Home Loan Interested Under Section 24

-₹200000

Less: Tax on employment under Section 16

-₹2400

Income Under Head Salaries

₹1,747,600

₹2,000,000

Less: Deduction Under Section 80C

-₹150000

Less: Deduction Under Section 80D

-₹50000

Less: NPS Contribution Under Section 80CCD

-₹50000

Total Income:

₹1,497,600

₹2,000,000

Income Tax Slab

Old Tax Rate

Income Tax to Be Paid

New Tax Rate

Income Tax to Be Paid

Taxable Income

 

₹1,497,600

 

₹2,000,000

Up to 2.5 Lakh

Nil

 

Nil

 

2.5 – 5 Lakh

5%

₹12,500

5%

₹12,500

5 – 7.5 Lakh

20%

₹50,000

10%

₹25,000

7.5 – 10 Lakh

20%

₹50,000

15%

₹37,500

10 – 12.5 Lakh

30%

₹75,000

20%

₹50,000

12.5 – 15 Lakh

30%

₹74280

25%

₹62,500

15 Lakh and above

30%

30%

₹150,000

Total Income Tax to be Paid

 

₹261,780

 

₹337,500

From the above examples, one can clearly see that the old tax structure offers higher tax benefits even though the tax slabs are higher. The new reduced tax rates are only beneficial if one does not need to claim any deductions or exemptions which is a rare case.

Benefits According to the Government

According to the government, introducing the new tax rates will help them gain more taxpayers and widen the tax base by luring unorganized sectors to start paying taxes at lower base rates. According to Mody, a huge portion of the unorganized sector is out of the tax frame network. Bringing them into the picture may help them further reduce income tax rates in the future. According to Sitharaman, potential taxpayers will not be harassed as CBDT will introduce a taxpayer charter.

Income Tax Calculation FY 2022-23 FAQs:

1. How is Income Tax Charged?

Income Tax is charged on the basis of an individual’s income according the Income Tax Slab. The slab rates usually change with every budget are also applicable based on age – Normal Citizens (up to 60 years of age), Senior Citizens (60-80 years of age) and Super Senior Citizens (above 80 years of age).

2. How is the Income Tax Calculated?

Income Tax Rates as per the slab is applied after all the deductions and exemptions have been calculated and removed. There will be certain deductions and exemptions which will not applicable in the new income tax structure. This is yet to be clarified.

3. Do I have to follow the New Income Tax Structure?

No. Currently you have the option of choosing between the old and new structure if you are a salaried individual. This is not applicable for persons owning a business and filing returns for their business. Please look at our examples to see which tax structure may be beneficial for you.

4. Why has the government decided to lower the tax rates in this year’s budget?

According to the government, they want to include many more tax payers within the framework and widen their base. This will help them to further lower income tax rates in the future. Several unorganized sectors are not paying taxes due to high rates.

5. What is the last date for filing Income Tax Returns for the AY2022-23?

For most individuals, the last date for filing income tax returns is July 31.


Income Tax News

ITR filing is now mandatory if your TDS, TCS is Rs 25,000 or more in a financial year

The government has now made it compulsory for an individual to file income tax returns if his total TDS/TCS during the financial year is Rs 25,000 or more, even if the individual’s income doesn’t exceeds the basic exemption limit. For senior citizens, this rule will apply if the individual’s aggregate TDS/TCS is Rs 50,000 or more in the year. In addition, an individual whose deposits in a saving bank account are INR 50 lakh or more in the fiscal year will also have to file an ITR irrespective of his income level. This is applicable for ITR filing of FY 2021-22.

The seventh proviso to Section 139 provided certain criteria that mandated the filing of income-tax returns. Such a move will help in increasing the number of income tax returns filed in the country and thus bring more transparency to the system.

News Updated Date: 27-05-2022

Income Tax Rules Applicable from April 1: Key Changes Include Cryptocurrency Tax, PF, Revised ITR Form

The new fiscal year and the new income tax and other restrictions began on Friday. Apart from CBDT and RBI announcements modifying laws, the standards were largely issued as part of the Union Budget 2022. Tax on crypto assets, new EPF tax regulations, and no requirement for ITRs for senior people over 75 will all be implemented.30% tax on gains on assets and cryptocurrencies. Except for the cost of acquisition, no deduction will be allowed. A new section 115BBH has been added to the Income Tax Act, 1961, to tax virtual digital assets. Higher TDS and TCS will apply to the ITR defaulters in FY 2022-23. Senior citizens aged 75 and above will not need to file ITR, subject to certain conditions. Contributions made by an individual till 31st March 2021, will be considered tax-exempt. New 1% TDS rule for non-agricultural immovable property.

News Updated Date: 13-04-2022


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