Income tax is a tax that is levied on the income earned by individuals, Hindu Undivided Families (HUFs), firms, companies, and other entities. The tax is calculated based on the total income of the taxpayer, which includes all sources of income such as salary, business income, capital gains, rent, interest, and other types of income.
In India, the Income-tax Act, of 1961, lays down the provisions for the levy, collection, and administration of income tax. According to the Act, all individuals, HUFs, firms, companies, and other entities are required to file an income tax return if their total income exceeds the minimum exemption limit specified by the Act.
Types of taxable income sources
In India, taxable income sources can be broadly classified into the following categories:
- Salary income: This includes income earned from employment, such as wages, salaries, bonuses, and allowances.
- Business income: This includes income earned from carrying on a business or trade, such as profits from a sole proprietorship or partnership firm.
- Capital gains: This includes income earned from the sale of capital assets, such as real estate, stocks, and bonds.
- Rental income: This includes income earned from renting out a property.
- Interest income: This includes income earned from investments, such as bank deposits, bonds, and debentures.
- Dividend income: This includes income earned from dividends paid by companies on their shares.
- Agricultural income: This includes income earned from agricultural activities, such as farming, livestock breeding, and horticulture.
- Income from other sources: This includes income earned from sources not covered under the above categories, such as lottery winnings, gambling, and income from hobbies.
In India, tax is levied on taxable income at the rates prescribed in the Income Tax Act. The tax rates vary based on the taxpayer’s income slab and the type of income.
Income Tax Slab Rates AY 2023-24 for Citizens Below 60 Years
The income tax slabs and rates for senior citizens (individuals above the age of 60 but below the age of 80)
The income tax slabs for super senior citizens (individuals aged 80 or above)
Surcharge on income tax for ay 2023-24
Individuals who have a net taxable income above 50 lakh rupees for the financial year 2022-23 will be required to pay a surcharge on their income tax. The rate of surcharge will be determined on the income tax slab for that financial year and will be as follows:
- 10% for net taxable income between 50 lakh and 1 crore rupees
- 15% for net taxable income between 1 crore and 2 crore rupees
- 25% for net taxable income between 2 crore and 5 crore rupees
- 37% for net taxable income above 5 crore rupees.
Things to consider while choosing the new income tax slab for ay 2023-24
Before deciding whether to opt for the new income tax slab for ay 2023-24 or not, there are a few things to consider:
- The new slab rate for ay 23-24 has lower income tax rates and at the same time, there is an increase in income tax slabs. However, it offers very few deductions. This means that you may not be able to claim certain tax breaks that were available under the old regime, such as deductions for house rent allowance (HRA) or contributions to a public provident fund (PPF).
- Senior and super-senior citizens were able to claim high deductions on the old tax regime. If you are a senior citizen, you may want to consider the old regime as it offers higher exemptions compared to the new regime, which has a fixed exemption limit of INR 2,50,000 for all taxpayers regardless of age.
- Some tax-saving investments such as NPS, PPF, or term life insurance policies provide both benefits of investment and tax exemption under the old tax regime. Not only do they reduce your tax, but they also offer financial security and grow your wealth. Under the new regime, these investments do not provide the same tax benefits.
- You can opt for an income tax calculator to calculate the tax and compare your tax under new and old tax regimes, based on your income and other factors. This will help you determine which regime suits the best for you.
- In India, taxable income can come from a variety of sources including employment, business, capital gains, rental properties, investments, dividends, agricultural activities, and other miscellaneous sources. The amount of tax an individual must pay is determined by their income level and the type of income they receive, as outlined in the Income Tax Act.