Income Tax Slabs for Salaried Employees and HUF

All about Income Tax Slabs for Employed Individuals and HUF

With the financial year 2022-23 coming to a close, it is time to review your tax liabilities and prepare to file your income taxes for the year, while simultaneously planning your taxes for the FY 2023-24. Though there is ample time left to file your income tax returns, it is best to learn about the various income tax slabs and rates applicable for both - FY 2022-23 and FY 2023-24.

In India, every individual, Hindu Undivided Family (HUF), business, corporate and other such establishments are required to pay income tax, which is calculated annually. The administration, collection and recovery of income tax are set according to the regulations under the Income Tax Act, 1961. 

According to the Union Budget 2023, salaried individuals can avail an income tax rebate under Section 87A of the Income Tax Act, 1961. This rebate allows individuals earning an income below ₹ 7 lakhs to pay a marginally lower tax amount under the new tax regime. It means that if your total tax payable is up to ₹25,000, the amount will be a total exemption. For FY 2022-23 this limit was set at ₹ 5 lakhs.   

Under the old tax regime, the tax rebate of ₹12,500 remains the same for both financial years, i.e., till income up to ₹5 lakhs.

Eligibility for salaried individuals to claim the rebate under Section 87A for FY 2023-24:

• One must be an Indian resident.

• The total income after all the deductions under Section 80 should not be higher than ₹ 7 lakhs.

HUF are ineligible for rebate under 87A

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Salaried individuals who opt for the new tax regime for FY 2023-24, will have to let go of the following deductions and benefits from 1 April 2023, as announced by Union Budget 2023.

• Under Section 80C, the investments made in Employees’ Provident Fund, Life Insurance Premium and Public Provident Fund are not available for deduction.

• Under Sections 80C and 80EE/ 80EEA, the deduction on payment of interest and principal amount towards housing loans up to ₹1.5 lakhs can no more be claimed for tax relief.

• Interest paid on the student loan debt under Section 80E.

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If you’ve opted for the new tax regime, you cannot claim the benefits from the following exemptions and deductions for both the previous and current financial years. 

• House Rent Allowance (HRA), based on the individual’s rent and salary structure. 

• The professional tax of ₹ 2,500. 

•  Leave Travel Allowance (LTA).  

• Deductions on entertainment allowance (applicable for government employees).

• Deduction of the interest payment of home loan for self-occupied/ vacant property under Section 24(b). 

• Deduction of the interest payment up to ₹2 lakhs for the purchase/construction/ repair/reconstruction of house property under section 24(b).

• Tax deduction under Section 35(1)(ii), 35(2AA), 32AD, 33AB, 35(1)(iii), 33ABA, 35(1)(ii), 35CCC(a), and 35AD of the IT Act. 

• Additional depreciation as specified under Section 32(ii) (a).

• The option to adjust the unabsorbed depreciation of previous years.

• Deductions as specified under Chapter VI-A such as 80IA, 80CCC, 80C, 80CCD, 80D, 80CCG, 80DDB, 80EE, 80E, 80EEA, 80DD, 80EEB, 80GG, 80IB, 80IAC, and 80IAB. 

• Minor child, helper allowances and allowances for children's education. 

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If salaried taxpayers opt for the new tax regime for FY 2023-24, they can benefit from the additional following income tax deductions announced in Union Budget 2023.

• You can claim a standard deduction of ₹ 50,000 under the head 'Income from salaries' only on earnings from their salary.

• The benefit of any NPS (National Pension Scheme) contribution by the employer to employee's NPS account Under Section 80CCD (2) of the Income-tax Act, 1961, is available. However, no tax deductions are allowed on the employee's own contribution. 

• For a private sector employee, the maximum deduction amount is 10% of their salary, while for a government employee, it is 14% of their salary.

• Up to 30% of the new employee cost is deductible under Section 80JJAA.

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The following are the income tax deductions applicable for both financial years 2022-23 and 2023-24. Salaried individuals opting for the new tax regime can avail of these benefits while filing returns for FY 2022-23 and while planning for FY 2023-24 tax returns.

• Employers' contributions made in a financial year to their employee's NPS and EPF and superannuation accounts, up to ₹ 7.5 lakhs are applicable for tax exemption.

• Tax exemption on the interest earned from their Employees' Provident Fund account, up to 9.5%.

• The lump-sum maturity amount received from the NPS account and the partial fund withdrawal from the Tier I NPS account, both are exempt from taxation.

• Tax exemption on the interest or the maturity amount received from the PPF account.

• Travel allowances for disabled employees, allowances to cover the travel cost or transfer of an employee, conveyance allowance, daily allowances are eligible for tax exemption, allowances to employees for performing official duties.

• Exemptions of up to ₹ 3,500 and ₹ 7,000 on interest on their Post Office Savings individual and joint accounts, respectively, under Section 10(15)(i). 

• Maturity amount received from Life Insurance Company account under Section 10(10D) is exempted.  

• Tax exemption on interests and maturity amounts received from the Sukanya Samriddhi Account.

• Gifts received from employers up to ₹ 5,000 can be exempted for tax.

• Exemption of up to ₹20 lakhs on the gratuity amount that non-government employees receive from their employer. For government employees, the entire gratuity is exempted from being taxed.

• Non-government employees can enjoy exemption up to 1/3 of their commuted pension if they receive gratuity. If they do not receive gratuity, then they can claim up to ½ of their commuted pensions.

• Interest of a home loan borrowed for a rented property is eligible for tax deduction.

• The leave encashment during retirement.

• Monetary benefits received from employers for voluntary retirement, up to ₹ 5 lakhs. 

• Education scholarships, retrenchment compensation, and monetary benefits for retirement. 

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We have listed some of the income tax benefits in the form of allowances and deductions under the old tax regime that can help reduce the tax liability for salaried individuals for financial years 2022-23 and 2023-24. These are:

• A standard deduction of up to ₹50,000.

• Leave Travel Allowance (LTA) twice in a block of four years, and House Rent Allowance (HRA).

• Reimbursement for expenses on telephone and mobile used at residence. 

• Employees can claim tax-free reimbursement of the expenses incurred on books, newspapers, periodicals, journals, etc.

• Expenses incurred on food coupons.

• Benefits on relocation allowance for shifting from one city to another for business purposes.

• Benefits on various facilities provided by the employer like health club facilities, cab facilities, gifts or vouchers.