Budget 2022: Income tax slabs for FY 2022-23 in India
The finance minister Nirmala Sitharaman did not announce any change in the tax slabs or rates in her Budget 2022. This dashes the high hopes of the hardworking salaried taxpayer. Thus, with no change in the income tax rates and slabs, an individual taxpayer will continue to have the same tax rates depending on the tax regime that will be chosen for FY 2022-23. The FY 2022-23 will start from April 1, 2022.
Effective from April 1, 2020, an individual salaried taxpayer has been given the option to continue with the old tax regime and avail deductions/tax exemptions such section 80C, 80D deductions, HRA, LTA tax exemptions etc. or to opt for the new tax regime and forgoing approximately 70 deductions and tax exemptions. The new tax regime offers lower tax rates as compared to the old tax regime.
Under both income tax regimes, tax rebate of up to Rs 12,500 is available to an individual taxpayer under section 87A of the Income-tax Act, 1961. This would effectively mean that individuals having net taxable income of up to Rs 5 lakh would not pay any income tax irrespective of the tax regime chose by them.
Another thing to keep in mind is that under the old income tax regime, basic tax exemption limit for an individual taxpayer depends on their age and residential status. However, in the new tax regime, the basic exemption limit is Rs 2.5 lakh in a financial year.
How your tax-saving looks post Budget 2022: Section 80C & more for taxpayers
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What is the section 80C benefit?
4 Feb, 2022
The section 80C benefit is the go-to tax-saving route many taxpayers take. Deductions under it are available only to individuals and Hindu Undivided Families (HUFs). Since FY 2014-15, the 80C limit has stood at Rs 1.5 lakh per annum. However, in the last 7+ years and especially in the recent past, expenses have gone up, salaries have increased, inflation has risen etc. whereas the 80C limit has remained as is.For this reason, it was on several taxpayers' wishlists that in Union Budget 2022, the government hike the section 80C limit to at least Rs 2.5 lakh per annum, for this would not only help the average taxpayer but also the government itself.
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What happened in Union Budget 2022?
4 Feb, 2022
Dashing the hopes of many, FM Nirmala Sitharaman let the 80C limit remain untouched in her Budget. This means that individuals opting for the old tax regime for FY 2022-23 will continue to claim maximum deduction of Rs 1.5 lakh in a financial year whereas those who opt for the new one will not be able to claim the section 80C tax deduction. An individual falling under the highest tax bracket of 30% can save tax of Rs 46,800 (inclusive of cess at 4%) by fully utilising the deduction under this section.Also read: 10 tax-saving strategies that can improve your financial health too
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How to reduce income tax via 80C
4 Feb, 2022
To claim deductions under this section, an individual is required to invest in specified instruments. Further, select expenditures are also allowed as deductions under section 80C. The major tax saving options available for claiming deduction under section 80C are:Life insurance premium paidContributions to Public Provident FunContributions to Employees' Provident Fund and Voluntary Provident FunRepayment of housing loan principaStamp duty and registration charges paid for purchase of housInvestments in ELSS or tax saving mutual fundInvestments in Sukanya Samriddhi Account schemTuition fees of childreInvestments in 5-year tax saving bank or postal fixed deposiInvestments in Senior Citizen Saving SchemeAlso read: How to use income tax rules for smart tax saving: 5 investment strategies
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Specific tax treatments
4 Feb, 2022
Investment avenues under section 80C have their own rate of return, liquidity and tax treatment on the returns earned. For instance, interest earned from 5-year tax saving bank FD is taxable in the hands of an individual at the income tax rates applicable to your income. On the other hand, interest earned on PPF investment is tax-exempt. In case of ELSS investments in mutual funds, income tax will be only once the investments are redeemed. The gains will be taxed as long-term capital gains at the rate of 10% without indexation, provided capital gains exceed Rs 1 lakh in a financial year. If the long-term capital gains from equity shares and/or equity mutual fund do not exceed Rs 1 lakh in the financial year, then such capital gains are tax-exempt too.Also read: Best tax saving options
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Arriving at taxable income
4 Feb, 2022
The taxable income of an individual is arrived at after reducing the eligible section 80C deduction amount from his gross total income. One needs to take into account the amounts already eligible for deduction as above and can only make fresh investments for the balance deduction, if needed.
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Here is a look at income tax rates and slabs under both the old and new tax regimes.
Tax slabs and rates for resident individuals above 60 years of age but below 80 years of age (Senior citizen)
Income tax slabs and rates for resident individual age above 80 years (Super senior citizen)
A cess at the rate of 4 per cent is added on the income tax amount. Further, surcharge is levied at different income tax rates if the total income exceeds Rs 50 lakh in a financial year.
Surcharge is levied as follows:
Do keep in mind that individuals having business income can opt for new tax regime. However, once opted they get one opportunity in their lifetime to switch back to the old tax regime.
