Income Tax Rates for Computation of Taxable Income | AY 2023-24

1. Introduction

Income-tax Act, 1961 contains provisions for computation of taxable income but the tax rates are not provided by the Income-Tax Act. Tax rates are provided by the Finance Act which is passed by Parliament along with the budget every year.

For instance, the Finance Act, 2022, provides tax rates in the First Schedule (Parts I, II and III) as follows –

• • Part I of the First Schedule to the Finance Act, 2022 – It gives income-tax rates for different assessees for the assessment year 2022-23.
  • Part II of the First Schedule to the Finance Act, 2022 – It gives rates for deduction of tax at source applicable for the current financial year i.e. 2022-23. However, the rates for tax deduction from salary are given by Part III.
  • Part III of the First Schedule to the Finance Act, 2022 – It gives rates for deduction of tax at source from salary and the tax rates for different assessees for advance tax during the current financial year i.e. 2022-23 (i.e. for assessment year 2023-24). This Part III generally becomes the Part I of the next Finance Act, i.e. for Finance Act, 2023. Thus, the Income-tax rate applicable on the income to be earned in the Financial Year 2022-23 is given in this part.

2. Tax Rates for Non-Corporate Assessee: [For Assessment Year 2023-24]

(A) For Individuals, (other than the individuals referred to in B & C below), Hindu Undivided Family (HUF), AOP/BOI (other than co-operative society) and every artificial juridical person: (Resident as well as Non-resident).

(B) For Individual, being resident in India and aged 60 years or more but less than 80 years, at any time during the previous year. (i.e. Senior Citizen)

(C) For Individual, being resident in India and aged 80 years or more, at any time during the previous year. (i.e. Super Senior Citizen)

Date of attaining a particular age will be 31st March for those born on 1st April:

The CBDT has clarified that a person born on 1st April would be considered to have attained a particular age on 31st March, the day preceding the anniversary of his birthday. A resident individual whose 60th/80th birthday falls on 1st April, 2023, would be treated as having attained the age of 60 years/80 years in the P.Y. 2022-23, and would be eligible for higher basic exemption limit of ` 3 lakh/` 5 lakhs in computing his tax liability for A.Y. 2023-24.

[Circular No. 28/2016 dated 27.07.2016]

Surcharge:

(a) In all the above cases (except AOP with ALL members as company), income tax computed shall be increased by surcharge as under:

[Amended by Finance Act, 2022]

Example:

(b) In case of AOP with all members as company, income tax computed shall be increased by surcharge as under:

[Inserted by Finance Act, 2022]

(D) For every Co-operative society:

Surcharge:

[Amended by Finance Act, 2022]

(E) For Firm [including Limited Liability Partnership (LLP)]:

Surcharge: 12% where the total income exceeds ` 1 crore.

3. Maximum Marginal Rate: [Sec. 2(29C)]

For the purpose of Income Tax Act, ‘Maximum Marginal Rate’ means the rate of income tax (including surcharge, if any) applicable in relation to the highest slab of income in the case of an individual, AOP or BOI, as the case may be, as specified in the Finance Act of the relevant year.

4. Marginal Relief for Non-corporates:

Due to levy of surcharge on income exceeding ` 50 lakhs and upto ` 1 crore, Marginal Relief is provided.

Where the difference between

• • the tax payable (including surcharge) on total income of more than ` 50 lakhs but not exceeding ` 1 crore and
  • the tax payable (surcharge not applicable) on total income of ` 50 lakhs exceeds the difference between
  • the total income of more than ` 50 lakhs and
  • the amount of ` 50 lakhs, then such excess is allowed as Marginal Relief.

Thus, where total income exceeds ` 50 lakhs but does not exceed ` 1 crore, aggregate of income tax and surcharge payable shall be restricted to: (Total Tax on ` 50 lakhs) + (Total income in excess of ` 50 lakhs)

Further, due to levy of surcharge on income exceeding ` 1 crore, Marginal Relief is provided as under:

Where the difference between

• • the tax payable (including surcharge @ 15%) on total income of more than ` 1 crore but not exceeding ` 2 crore and
  • the tax payable (including surcharge @ 10%) on total income of ` 1 crore; exceeds the difference between
  • the total income of more than ` 1 crore and
  • the amount of ` 1 crore, then such excess is allowed as Marginal Relief.

Thus, where total income exceeds ` 1 crore but does not exceed ` 2 crore, Total of income-tax and surcharge shall be restricted to: (Total Tax on ` 1 crore including surcharge) + (Total income in excess of ` 1 crores)

Similarly, the Marginal relief shall be calculated in the same manner as given above where the total income exceeds ` 2 crore but does not exceed ` 5 crore or when it exceeds ` 5 crore.

Cess: Health and Education Cess (H&EC) @ 4% on income tax (inclusive of surcharge) shall be chargeable. Cess shall be added after Marginal relief.

5. Optional Tax Scheme for individuals and Hindu undivided family: [Sec. 115BAC]

Notwithstanding anything contained in this Act but subject to the provisions of this Chapter i.e. secs. 110 to 115BBG, an individual or HUF (whether resident or non-resident, whether senior citizen, super senior citizen or otherwise), shall, at his option, pay the income-tax on its total income for any previous year relevant to the assessment year beginning on or after 01.04.2021 at the following rates:

Conditions to be satisfied for exercising option:

The total income of the individual or HUF is computed:

(i) without any exemption or deduction under

• • • section 10(5) [related to Leave travel concession],
    • section 10(13A) [related to House Rent Allowance],
    • section 10(14) other than those prescribed (refer below),
    • section 10(17) [related to daily allowance/constituency allowance of MPs and MLAs],
    • section 10(32) [related to minor child’s income clubbed in hands of the parent assessee],
    • section 10AA [related to SEZ],
    • section 16 [related to standard deduction and deductions of entertainment allowance and professional tax from Gross Salary],
    • section 24(b) [related to interest on loan taken for self-occupied or unoccupied house property],
    • section 32(1)(iia) [related to additional depreciation],
    • section 32AD [related to investment in New Plant and Machinery in notified backward areas],
    • section 33AB [related to deposit tea/coffee/rubber development account],
    • section 33ABA [related to deposit in Site restoration fund],
    • section 35(1)(ii)/(iia)/(iii), section 35(2AA) [related to payments/contributions for scientific research or social and statistical research],
    • section 35AD [related to capital expenditure for specified business],
    • section 35CCC [related to expenditure on agricultural extension project],
    • section 57(iia) [related to family pension deduction],
    • any provisions of Chapter VI-A other than

1. 1. 1. 1. Sec. 80CCD(2) [employer’s contribution to pension fund],
         2. Sec. 80JJAA [deduction for additional employee cost], and
         3. Sec. 80LA [only for units located in International Financial Service Centre (IFSC) which fulfils the conditions specified therein].

(ii) without 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 above; or
    • loss under the head ‘Income from house property’ with any other head of income;

Note: Such loss and depreciation referred above shall be deemed to have been already given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year.

(iii) after considering depreciation u/s 32 [other than depreciation u/s 32(1)(iia)] in the manner as may be prescribed.

(iv) without any exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force.

Specified Allowances u/s 14 allowed as exemption under the option to tax as per Sec. 115BAC

[Notification No. 38/2020 dated 26.06.2020]

An employee who has exercised the option u/s 115BAC shall be entitled to exemption only in respect of the following allowances to the extent and subject to the conditions, if any, specified therein:

• • Travelling allowance/Transfer allowance (to meet the cost of travel on office tour or on transfer).
  • Conveyance allowance (to meet the expenditure on conveyance in performance of office duties, but not for conveyance between office and residence).
  • Daily allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
  • Transport Allowance (i.e. upto ` 3,200 p.m.) exemption allowed to an employee who is blind, deaf, dumb or orthopedically handicapped for commuting between place of office and place of residence.

It has been further clarified that the exemption of upto ` 50 per meal in respect of free meals provided during business house at office/business premises or through paid vouchers shall not be available to an employee exercising option u/s 115BAC.

Failure to satisfy the above conditions

Where the person fails to satisfy the above conditions, in any previous year, the option shall become invalid in respect of the relevant assessment year and subsequent assessment years and other provisions of this Act shall apply, as if the option had not been exercised for the relevant assessment year and subsequent assessment years.

Unabsorbed additional depreciation allowance

Where there is a depreciation allowance in respect of a block of asset which has not been given full effect prior to the assessment year beginning on 01.04.2021, corresponding adjustment shall be made to WDV of such block of assets as on 01.04.2020 in such manner as may be prescribed, if the option is exercised for a previous year relevant to the assessment year beginning on 01.04.2021.

Exercising option in prescribed form

This section shall be applicable only if the option is exercised in Form 10-IE in the prescribed manner by the person:

(i) In respect of individual or HUF having income from business or profession, on or before the due date specified u/s 139(1) for furnishing ROI for the relevant assessment year and such option once exercised shall also apply to subsequent assessment years. If such individual or HUF having business or professional income wants to opt out of this section, then he may withdraw such option only once for a previous year other than year in which it is exercised and thereafter, such person shall never eligible to exercise option under this section except when he does not have business or professional income, in which case, he can opt this section as per clause (ii) below.

(ii) In respect of individual or HUF not having business or professional income, the option under this section can be exercised alongwith ROI to be furnished u/s 139(1) for relevant assessment year. This needs to be done every year if he opts to pay tax under this section. Moreover, one may exit from the option in any year without exercising the option for that year and may re-enter into the scheme, if he wishes to opt the option in a later year. The only condition is that return must be filed within the due date of filing ROI u/s 139(1). In case belated return is filed, then the option cannot be exercised.

Points to Note:

• • The benefit of this section is available only to Individual or HUF irrespective of their residential status.
  • Sec. 115BAC provides the same exemption limit for all categories of individuals i.e. individuals below age of 60 or senior citizen or super senior citizen. This means the exemption limit of ` 3 lakh for senior citizens and ` 5 lakh for super senior citizens will not be offered to citizens of these categories by Sec. 115BAC.
  • Surcharges @ 10%, 15%, 25% and 37%, as the case may be, shall apply, even if an assessee opts for section 115BAC.
  • Rebate u/s 87A is available, if any.
  • Current year House Property Loss cannot be set-off against any other head of Income.
  • Secs. 115JC and 115JD has been amended to provide that the provisions relating to AMT and carry forward/set off of AMT credit shall not apply to such individual or HUF exercising option u/s 115BAC.

6. Rebate of Income tax for Resident Individuals having taxable income not exceeding ` 5,00,000: [Sec. 87A]

An assessee, being an individual resident in India, whose total income does not exceed ` 5,00,000, shall be entitled to a rebate (i.e. a deduction from tax) as LOWER of following:

• • an amount equal to 100% of his income-tax; or
  • an amount of ` 12,500.

Points to Note:

• • Rebate is available only to a Resident Individual assessee.
  • For claiming rebate, the Total Income (i.e. GTI after allowing deductions u/ss 80C to 80U) should be less than or equal to ` 5.0 lakhs.
  • Rebate cannot exceed the tax payable.
  • Cess is added after availing rebate.
  • Rebate is not available in respect of tax payable @ 10% on long term capital gains u/s 112A.

7. Optional Tax Scheme for Resident Co-operative Societies: [Sec. 115BAD]

Notwithstanding anything contained in this Act but subject to the provisions of this Chapter i.e. Secs. 110 to 115BBG, a co-operative society resident in India, may, at its option, pay the income-tax on its total income for any previous year relevant to the assessment year beginning on or after the 1st April, 2021, at the rate of 22% (plus surcharge 10% and cess 4% = 25.168% irrespective of the Total Income), subject to satisfying the following conditions:

• • The total income of a co-operative society has been computed:

1. without any deduction under:

(i) section 10AA [related to SEZ],

(ii) section 32(1)(iia) [related to additional depreciation],

(iii) section 32AD [related to benefit of investment allowance],

(iv) section 33AB [related to tea/coffee/rubber development account], section 33ABA [related to site restoration fund],

(v) section 35(1)(ii)/(iia)/(iii), section 35(2AA) [related to expenditure and contribution for scientific research/social research]

(vi) section 35AD [related to capital expenditure on specified business],

(vii) section 35CCC [related to expenditure on agricultural extension project],

(viii) under any provisions of Chapter VI-A other than:

–  Sec. 80JJAA; and

–  Sec. 80LA [only for units located in International Financial Service Centre (IFSC) which fulfils the conditions specified therein].

2. without 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 clause (i); and

Note: Loss and depreciation referred to in clause (ii) above shall be deemed to have been already given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year.

3. after considering depreciation u/s 32 [other than depreciation u/s 32(1)(iia)] in the manner as may be prescribed.

Failure to satisfy the above conditions

Where the person fails to satisfy the above conditions, in any previous year, the option shall become invalid in respect of the relevant assessment year and subsequent assessment years and other provisions of this Act shall apply, as if the option had not been exercised for the relevant assessment year and subsequent assessment years.

Unabsorbed additional depreciation allowance

Where there is a depreciation allowance in respect of a block of asset which has not been given full effect prior to the assessment year beginning on 01.04.2021, corresponding adjustment shall be made to WDV of such block of assets as on 01.04.2020 in such manner as may be prescribed, if the option is exercised for a previous year relevant to the assessment year beginning on 01.04.2021.

Exercising option in prescribed form

This section shall be applicable only if the option is exercised by the person in Form 10-IF in the
prescribed manner on or before the due date specified u/s 139(1) for furnishing ROI for the relevant assessment year and such option once exercised shall also apply to subsequent assessment years.

Provided that once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.

Points to Note:

• • The benefit of this section is available only to Resident Co-operative Society.
  • Sec. 115JC and 115JD has been amended to provide that the provisions relating to AMT and carry forward/set off of AMT credit shall not apply to Co-operative society opting for Sec. 115BAD.

Also Read:
Income Tax Slab Rates for A.Y. 2023-24 | F.Y. 2022-23