How Does Income Tax Work?
Every person who earns money must pay income tax to the government. Given that it considerably increases the country’s revenue, it is an essential component of any economy. Individuals, Hindu Undivided Families (HUFs), businesses, and other entities that produce income are all subject to income tax. Based on the government’s annual budget, the income tax rates are adjusted.
Concerning Income Tax Slab 2022-23
The Finance Minister altered the income tax slab 2022–23 in the Union Budget 2021 with the intention of assisting taxpayers with lower incomes while making up for the revenue loss by eliminating several tax exemptions and deductions.
Individuals and HUFs (younger than 60 years of age) with an annual income up to Rs. 2.5 lakh are exempt from paying taxes; however, those with an annual income beyond Rs. 15 lakh are subject to a 30% tax rate. The fact that neither the tax rates for senior citizens—defined as those 60 and older but less than 80—nor super senior citizens—defined as those 80 and older—have changed is significant.
The following are the new income tax brackets for the Assessment Year 2022-2023:
Persons and HUFs only:
For individuals and HUFs (younger than 60 years of age) with an annual income up to Rs. 2.5 lakh, there is no tax obligation.
For individuals and HUFs (younger corporations), the tax rate is 5%.
For individuals and HUFs (younger than 60 years of age) having an annual income between Rs. 2.5 lakh and Rs. 5 lakh, the tax rate is 5%.
For individuals and HUFs (younger than 60 years of age) with yearly incomes of Rs. 5 lakh to Rs. 7.5 lakh, the tax rate is 10%.
For individuals and HUFs (under 60 years of age) having yearly incomes of between Rs. 7.5 lakh and Rs. 10 lakh, the tax rate is 15%.
For individuals and HUFs (younger than 60 years of age) with annual incomes between Rs. 10 lakh and Rs. 12.5 lakh, the tax rate is 20%.
Individuals and HUFs (under 60 years old) pay 25% of their yearly income in taxes.
For individuals and HUFs (under 60 years of age) having yearly incomes of between Rs. 12.5 lakh and Rs. 15 lakh, the tax rate is 25%.
The tax rate is 30% for individuals and HUFs (younger than 60 years of age) with annual incomes over Rs. 15 lakh.
Other Tax Deductions
The existing tax exemptions and deductions, such as Section 80C (Investments in Public Provident Fund, Employee Provident Fund, Life Insurance, Equity Linked Saving Schemes, etc.), Section 80D (Health Insurance Premium), Section 80G (Donations to Charitable Organizations), and others, will not be available to individuals and HUFs who choose the new tax regime.
Individuals and HUFs, however, have the option to maintain the previous tax system.
Nonetheless, people and HUFs can continue to use the previous tax system and still be eligible for certain exemptions and deductions.
For the elderly:
Following are the income tax brackets for elderly citizens (60 years of age or older but under 80 years of age) for the Assessment Year 2022–2023:
There is no tax due for people (60 years of age or older but under 80 years of age) with an annual income up to Rs. 3 lakh.
For those who are 60 years of age or older but under 80 years of age and have an annual income of For those (60 years of age or over but under 80 years of age) with yearly incomes of between Rs. 3 lakh and Rs. 5 lakh, the tax rate is 5%.
For those who are 60 or older but under 80 and earn an annual income of between Rs. 5 lakh and Rs. 10 lakh, the tax rate is 20%.
For those who are 60 years of age or older but under 80 and have an annual income of more than Rs. 10 lakh, the tax rate is 30%.
It is crucial to remember that seniors have the option of choosing the new tax system or sticking with the previous one and utilizing the existing tax breaks and deductions, such as Sections 80C, 80D, and 80G. Older citizens may also qualify for a tax deduction under Section 80TTB, which enables an interest income deduction of up to Rs. 50,000, if they receive income from pensions and interest from fixed deposits.
For Super senior citizens
Super senior citizens (those who are 80 years or more) continue to pay the same tax rates as senior citizens.
Conclusion
In conclusion, the updated income tax slabs presented in the Union Budget 2021 for the Assessment Year 2022–23 have provided much-needed relief to individual taxpayers with lower earnings.
The government has increased revenue by eliminating tax exemptions and deductions for people making over Rs. 5 lakh annually, and the new tax system has made filing taxes easier for taxpayers. People should carefully consider their income and select the tax structure that best satisfies their financial demands. Many Indian taxpayers have welcomed the amended income tax rates as a welcome relief given the country’s present economic climate and ongoing pandemic. Overall, the new income tax bands are anticipated to stimulate the Indian economy by incentivizing saving and investing while also lessening the tax burden on those with lower earnings.
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