Rates of Income tax for FY 2022-23 (assessment year 2023-24) (2023)

(A) Income tax Rates for Individual & HUF (who opted for new tax regime u/s 115BAC)

As we know that W.e.f FY 2020-21 i.e. budget 2020, two options of slab rate are available for Individual & HUF as per option given u/s 115BAC. Every taxpayer who is Individual or HUF, have to choose between (i)New tax regime (ii)Old tax regime. Salaried employee have to submit their option to their employer at the start of financial year to enable the employer to deduct the TDS as per choosen tax regime. The option is also required to selected while filing Income tax Return. Some notable points about NEW TAX REGIME as given u/s 115BAC are given below:-

• New tax regime is available only for Individual & HUF.
• Slab rates under New Tax regime are not differentiated on the basis of age group. Hence in new slab rate, same rate will be applied for individual aged above 60 or below 60 or above 80.
• Whether this OPTION is exercised only once or Every year:– If assessee is having no business income then this option shall be exercised in every coming year. But If assessee has business income, then option once exercised shall be valid for current & subsequent previous years.
• Slab rate under New Tax regime are lesser than Old tax regime.
• but If a tax payer opt for this new slab rate then he has to forego various deduction and exemption like deduction u/s 80C, standard deduction, NPS deduction u/s 80CCD(1b) but he may continue to avail exemption of allowance given under section 10(14) like conveyance allowance etc.

SLAB RATE UNDER NEW TAX Regime u/s 115BAC

Following tax rates will be applicable for Individual & HUF who opted for NEW TAX REGIME for financial year 2022-23 (assessment year 2023-24):-

But If option given under 115BAC is exercised to choose New Slab rate (Option A ) then following deduction & exemption shall not be available to the taxpayers:-

• Leave travel concession as contained in clause (5) of section 10;
• House rent allowance as contained in clause (13A) of section 10;
• Some of the allowance as contained in clause (14) of section 10;
• Allowances to MPs/MLAs as contained in clause (17) of section 10;
• Allowance for income of minor as contained in clause (32) of section 10;
• Exemption for SEZ unit contained in section 10AA;
• Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in section 16;
• Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23. (Loss under the head income from house property for rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law);
• Additional deprecation under clause (iia) of sub-section (1) of section 32;
• Deductions under section 32AD, 33AB, 33ABA;
• Various deduction for donation for or expenditure on scientific research contained in sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35;
• Deduction under section 35AD or section 35CCC;
• Deduction from family pension under clause (iia) of section 57;
• Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc). However, deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed.
• Set off of any loss,-carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in (a) above; or under the head house property with any other head of income; is not allowed.

BUT following allowances notified under section 10(14) of the Act to remain allowed to the Individual or HUF exercising option of NEW SLAB RATE (option A) under the proposed section:-

• Transport Allowance granted to a divyang employee to meet expenditure for the purpose of commuting between place of residence and place of duty
• Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office;
• Any Allowance granted to meet the cost of travel on tour or on transfer;
• Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
• deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme) and section 80JJAA (for new employment).

(B)-Income tax Rates for Individual & HUF (Not opting for New tax regime u/s115BAC), AOP(Association of person), BOI (body of individual) and AJP (artificial Judicial person and TRUST.

IF an individual or HUF opt for OLD slab rate (not opting New Tax Regime u/s 115BAC), then all exemption & deduction as per provisions of income tax are allowed and following slab rates are applicable for FY 2022-23( AY 2023-24):-

• Individual (resident or non-resident), who is of the age of less than 60 years on the last day of the relevant previous year and HUF:-–

• Resident senior citizen, i.e., every individual, being a resident in India, who is of the age of 60 years or more but less than 80 years at any time during the previous year:–

• Resident super senior citizen, i.e., every individual, being a resident in India, who is of the age of 80 years or more at any time during the previous year:–

• Slab rate for association of person (AOP), Body of individuals(BOI) and artificial judicial person (AJP) & Trust. In case of AOP, BOI, AJP & Trust , option to choose new slab rate system-OPTION-A is not available and following tax rates are applicable without any choice:-

Common Notes for New Tax Regime and Old Tax Regime:-

(1) Surcharge: –Surcharges is applicable at following rates:-

(2) Health and Education cess:– 4% of income tax and surcharge.

(3)Rebate under section 87A, A resident individual whose net income does not exceed Rs. 500000/- can avail rebate u/s 87A which is an amount equal to 100% of income tax or Rs. 12500/- whichever is less. Rebate u/s 87A is deductible from income tax before calculating education cess.

(4) If Net income exceeds Rs. 50 lakhs but does not exceeds Rs. 1 crore then surcharge @ 10% is applicable but if net income exceeds Rs. 1 crore then surcharge is applicable at the rate of 15% of income tax. Further surcharge is subject to marginal relief i.e amount payable as income tax & surcharge shall not exceed the total amount payable as income tax on total income of Rs. 50 Lakhs (or 1 Crore as the case may be) by more than the amount of income that exceeds Rs. 50 Lakhs ( or 1 crore as the case may be).

(5) Health and Education Cess” is 4% and it is to be levied on income tax & Surcharge. Surcharge is calculated on income tax before adding HEC. But HEC are calculated on income tax including surcharge if any.

(6) Alternate minimum tax: Tax payable cannot be less than 18.5% (+SC+EC+SHEC) of adjusted total income u/s 115JC. (Not applicable to those individual, HUF, AOP, BOI & AJP whose adjusted total income does not exceed Rs. 20 Lakhs AND who are not claiming any deduction u/s 10AA/ 35AD/ Chapter VI heading C-“deduction for certain incomes”.)

(7) A standard deduction of `50,000/- is allowed from salary income but this is in lieu of the earlier exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses.(Reimbursement by the employer for amount spent by employee for medical treatment of self or his family was exempt upto Rs. 15000/- in a year upto FY 2017-18 but this exemption is withdrawn from FY 2018-19 after introduction of standard deduction) However, the transport allowance at enhanced rate shall continue to be available to differently abled persons.

(8) W.e.f 1-4-2020 (FY 20-21), dividend distribution tax is abolished and dividend is made taxable in the hands of taxpayers at normal applicable rates. Dividend above Rs. 5000 is made subject to TDS @ 10% (TDS rate is 7.5% upto 31-3-2021)

(9) W.e.f. 1-4-2021 (FY 21-22), In order to rationalise tax exemption for the income earned by high income employees, tax exemption for the interest income earned on the employees’ contribution to various provident funds is restricted to the annual contribution of ` 2.5 lakh. This restriction shall be applicable only for the contribution made on or after 01.04.2021. Hence w.e.f 1-4-2021, Interest on that part of employee’s contribution to PF which exceeds 2.5 lakh in the year is taxable.

(10) A trust is chargeable to tax as per the slab rates which are applicable to an individual (not being a senior citizen or super senior citizen).

(11) Hence assessee is required to choose between old & new slab rates. Different decision may be useful for different assessees. Before taking any decision assessee should calculate his tax liability under both the options predicting his approximate income and then he has to choose the option in which his tax liability is less. A basic comparison of OLD & NEW tax regime is given here:-

(C) Income tax Rates for Firms

• For FY 2022-23, Income of Firms is taxable at the rate of 30%.
• Business under Proprietorship is not covered here, Income from Proprietorship is taxable in the hand of Proprietor in his Individual return under the head “PGBP – Profits & Gains of Business or Profession” .
• Surcharge:- In case income of firm exceeds Rs. 1 crore then surcharge @ 12% of income tax is applicable which is subject to marginal relief ie. The amount payable as income tax & surcharge shall not exceed the total amount payable as Income tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
• Health & Edu. Cess:4% “Health and Education Cess” to be levied on the tax payable & Surcharge.
• Alternate minimum tax:Tax payable by firm cannot be less than 18.5% (+SC+EC+SHEC) of adjusted total income u/s 115JC.

(D) Income tax Rates for Companies

• Rate of income tax For FY 2022-23 for companies is as given below:

• Surcharge: If net income of a company does not exceed Rs. 1 crore, surcharge will be nil . For other cases, rate of Surcharge to be calculated on Income tax are given below:- (However Surcharges are subject to marginal Relief as under:-
• i)Where income exceeds Rs. 1 crore but not exceeding Rs. 10 crore, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
• ii)Where income exceeds Rs. 10 crore, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore)

• HEC:4% “Health and Education Cess” to be levied on the tax & surcharge.
• A company is required to pay higher of the tax calculated under the following two provisions:
  1. Tax liability as per the Normal provisions of income tax act(as stated above)
  2. Tax liability as per the MAT provisions given in Sec 115JB(18.5 % of Book Profits plus HEC & surcharge if applicable. ( Note thatSection 115JB of the Income-tax Act was amended by the Taxation Laws (Ordinance), 2019 (‘Ordinance’) to reduce the rate of MAT from 18.5% to 15% with effect from Assessment Year 2020-21.However, the Taxation Laws (Amendment) Bill, 2019, as tabled in the parliament on 25-11-2019, proposes to insert a proviso to section 115JB(1) that the rate of minimum alternative tax shall be reduced from 18.5% to 15% from previous year commencing on or after the April 1, 2020)

(E) Income tax Rates for Co-operative Societies

• Rates of income tax For FY 2022-23 for co-operative societies are as given below:

• Surcharge:- As per amendment by budget 2022, In case income of co-operative society exceeds Rs. 1 crore but do not exceed 10 crore, then surcharges applicable is 7% but in case income exceeds 10 crore then surcharge @ 12% of income tax is applicable which is subject to marginal relief ie. The amount payable as income tax & surcharge shall not exceed the total amount payable as Income tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
• EC & SHEC:4% “Health and Education Cess” to be levied on the tax & surcharge.
• Alternate minimum tax:Tax payable by co-operative society cannot be less than 15% (reduced from 18.5% by budget 2022) (+SC+EC+SHEC) of adjusted total income u/s 115JC.
• The Finance Act, 2020 has inserted a newSection 115BADin Income-tax Act to provide an option to the co-operative societies to get taxed at the rate of 22%plus10% surcharge and 4% cess. The resident co-operative societies have an option to opt for taxation under newlySection 115BADof the Act w.e.f. Assessment Year 2021-22. The option once exercised under this section cannot be subsequently withdrawn for the same or any other previous year.
• If the new regime ofSection 115BADis opted by a co-operative society, its income shall be computed without providing for specified exemption, deduction or incentive available under the Act. The societies opting for this section have been kept out of the purview of Alternate Minimum Tax (AMT). Further, the provision relating to computation, carry forward and set-off of AMT credit shall not apply to these assessees
• The option to pay tax at lower rates shall be available only if the total income of co-operative society is computed without claiming specified exemptions or deductions

(F) Income tax Rates for Local Authorities

• For FY 2022-23, Income of Local Authority is taxable at the rate of 30%.
• Surcharge:- In case income exceeds Rs. 1 crore then surcharge @ 12% of income tax is applicable which is subject to marginal relief ie. The amount payable as income tax & surcharge shall not exceed the total amount payable as Income tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
• Health & Edu. Cess:The existing 3% education cess is replaced by a 4% “Health and Education Cess” to be levied on the tax & surcharge.
• Alternate minimum tax:Tax payable cannot be less than 18.5% (+SC+EC+SHEC) of adjusted total income u/s 115JC.

(G) Income taxable at rate specified in Income tax Act. (Income taxable at special rates)

Following given are list of some important cases of income which is taxable at rates specified in Income-tax Act and not at rates mentioned above:-

(H) Some important recent changes in income tax:-

• W.e.f FY 2021-22, To incentivise digital transactions and to reduce the compliance burden of the person who is carrying almost all of their transactions digitally, the limit for tax audit for persons who are undertaking 95% of their transactions digitally is increased from ` 5 crore to ` 10 crore.
• W.e.f. 1-4-2021 (FY 21-22), In order to rationalise tax exemption for the income earned by high income employees, tax exemption for the interest income earned on the employees’ contribution to various provident funds is restricted to the annual contribution of ` 2.5 lakh. This restriction shall be applicable only for the contribution made on or after 01.04.2021. Hence w.e.f 1-4-2021, Interest on that part of employee’s contribution to PF which exceeds 2.5 lakh in the year is taxable.
• W.e.f FY 2021-22, senior citizen pensioners who are of 75 years of age or above, and are having only interest income apart from the pension income, are not required to file income tax return if the full amount of tax payable has been deducted by the paying bank.
• W.e.f FY 2021-22, In order to reduce compliance burden, the time-limit for re-opening of assessment is being reduced to 3 years from the current 6 years from the end of the relevant assessment year. Re-opening up to 10 years is proposed to be allowed only if there is evidence of undisclosed income of ` 50 lakh or more for a year.
• Limit of Rebate under section 87A is increased to Rs. 12500/- from 2500/- and Further condition of net taxable income for claiming the rebate is also increased to Rs. 500000/– from Rs. 350000/-. From Fy 2019-20, this rebate is available if total income of resident individual is upto Rs. 500000/-.
• Threshold limit u/s 194A, for deduction of TDS form interest other than interest on securities is increased to Rs. 40000/- from Rs. 10000/-. This limit was already increased to Rs. 50000/- for senior citizens.
• Threshold limit u/s 194I, for deduction of TDS form Rent is increased to Rs. 240000/- from Rs. 180000/- from FY 2019-20.
• Exemption u/s 54 extended to purchase /construction of two residential houses.
• Notional Rent on second self occupied house property is exempt from tax. refer section 23 & 24.
• In the Union Budget, 2017, corporate tax rate was reduced to 25% for companies whose turnover was less than `50 crore in financial year 2015-16. In Budget 2018, the benefit of this reduced rate of 25% also to companies who have reported turnover up to`250 crore in the financial year 2016-17. In Budget 2019, the benefit of this reduced rate of 25% also to companies who have reported turnover up to`400crore in the financial year 2017-18.
• Long term capital gains ( arising from transfer of listed equity shares, units of equity oriented fund and unit of a business trust) exceeding `1 lakh shall be taxed at the rate of 10% without allowing the benefit of any indexation. However, all gains up to 31st January, 2018 will be grandfathered. For example, if an equity share is purchased six months before 31st January, 2018 at `100/- and the highest price quoted on 31st January, 2018 in respect of this share is `120/-,there will be no tax on the gain of `20/- if this share is sold after one year from the date of purchase. However, any gain in excess of `20 earned after 31st January, 2018 will be taxed at 10% if this share is sold after 31st July, 2018. The gains from equity share held up to one year will remain short term capital gain and will continue to be taxed at the rate of 15%.
• A standard deductionfrom salary income is increased to Rs. 50000/- from Rs. 40000/- but this is in lieu of theearlier exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses. However, the transport allowance at enhanced rate shall continue to be available to differently abled persons.
• Under section 44AB of the Act, every person carrying on business is required to get his accounts audited, if his total sales, turnover or gross receipts, in business exceed or exceeds one crore rupees in any previous year. In case of a person carrying on profession he is required to get his accounts audited, if his gross receipt in profession exceeds, fifty lakh rupees in any previous year. In order to reduce compliance burden on small and medium enterprises, it is proposed to increase the threshold limit for a person carrying on business from one crore rupees to five crore rupees in cases where,-
  • aggregate of all receipts in cash during the previous year does not exceed five per cent of such receipt; and
  • aggregate of all payments in cash during the previous year does not exceed five per cent.

• W.e.f 1-4-2020 (FY 20-21), dividend distribution tax is abolished and dividend is made taxable in the hands of taxpayers at normal applicable rates. Dividend above Rs. 5000 is made subject to TDS @ 10% (TDS rate is 7.5% upto 31-3-2021)
• 15% concessional rate of corporate tax extended to Power Sector.
• Cooperative societies provided an option to be taxed at 22 % with no exemption
• Faceless Appeals to be enabled in lines of faceless assessments
• PAN to be allotted instantly on basis on Aadhar.

Tax proposals in Union budget 2022

1. In Budget 20222, No change is proposed in personal tax rates/slabs.
2. The concept of “Updated Return” is introduced. An “Updated return” can be filed within two years from the end of the relevant assessment year. Some taxpayers may realize that they have committed omissions or mistakes in correctly estimating their income for tax payment. Updated Return will provide an opportunity to correct such errors, Assessee file an Updated Return on payment of additional tax.
3. Currently, cooperative societies are required to pay Alternate Minimum Tax at the rate of18.5%. However, companies pay the same at the rate of 15%. To provide a level playing field between co-operative societies and companies, It is proposed to reduce this rate for the cooperative societies also to 15%..
4. It is proposed to reduce surcharge on cooperative societies to 7% from 12%, for those whose income is between Rs 1 crore and Rs 10 crore.
5. In an effort to establish a globally competitive business environment for certain domestic companies, a concessional tax regime of 15 per cent tax was introduced by government for newly incorporated domestic manufacturing companies. It is proposed to extend the last date for commencement of manufacturing or production under section 115BAB by one year i.e. from 31st March, 2023 to 31st March, 2024.
6. Deduction for employer contribution to NPS increased to 14% from 10% earlier for State govt employees on par with central govt employees
7. There has been a phenomenal increase in transactions in virtual digital assets (like crypto currencies). The magnitude and frequency of these transactions have made it imperative to provide for a specific tax regime. Accordingly, for the taxation of virtual digital assets, It is proposed to provide that any income from transfer of any virtual digital asset shall be taxed at the rate of 30 per cent. · No deduction in respect of any expenditure or allowance shall be allowed while computing such income except cost of acquisition. Further, loss from transfer of virtual digital asset cannot be set off against any other income. · Further, in order to capture the transaction details, I also propose to provide for TDS on payment made in relation to transfer of virtual digital asset at the rate of 1 per cent of such consideration above a monetary threshold. · Gift of virtual digital asset is also proposed to be taxed in the hands of the recipient.
8. The present law provides for deduction to the parent or guardian only if the lump sum payment or annuity is available to the differently abled person on the death of the subscriber i.e. parent or guardian. It is proposed to s allow the payment of annuity and lump sum amount to the differently abled dependent during the lifetime of parents/guardians.
9. In the globalized business world, there are several works contracts whose terms and conditions mandatorily require formation of a consortium. The members in the consortium are generally companies. In such cases, the income of these AOPs has to suffer a graded surcharge upto 37 per cent, which is a lot more than the surcharge on the individual companies. Accordingly, It is propose to cap the Surcharge of these AOP’s at 15 per cent.
10. The long-term capital gains on listed equity shares, units etc. are liable to maximum surcharge of 15 per cent, while the other long term capital gains are subjected to a graded surcharge which goes upto 37 per cent. I propose to cap the surcharge on long term capital gains arising on transfer of any type of assets at 15 per cent.
11. It is proposed that no set off, of any loss shall be allowed against undisclosed income detected during search and survey operations.
12. It is proposed to provide for tax deduction by the person giving benefits under business promotion strategy, if the aggregate value of such benefits exceeds ` 20,000 during the financial year.
13. It is proposed to provide that, if a question of law in the case of an assessee is identical to a question of law which is pending in appeal before the jurisdictional High Court or the Supreme Court in any case, the filing of further appeal in the case of this assessee by the department shall be deferred till such question of law is decided by the jurisdictional High Court or the Supreme Court.
14. Duty concessions being given to promote electronics manufacturing, wearables and hearables devices included. Duty concessions to parts of mobile phones including camera module etc
15. More than 350 exemptions on some agri products, chemicals, drugs, etc to be phased out.
16. Concessional customs duty on capital goods to be phased out, initial rate of 7.5% to be imposed.