What Are the Current Income Tax Slabs? A Breakdown for Taxpayers

Income tax is a pivotal component of India’s financial structure, and understanding the current income tax slabs is indispensable for taxpayers. Taxpayers in India are categorized based on their income, with varying tax rates assigned to different slabs. This article elucidates the current income tax slabs and provides insights into short-term capital gains tax.

Income Tax Slabs

The Indian income tax system is progressive, meaning the tax rate increases as the taxpayer’s income increases. The slabs are differentiated based on individual age categories and income levels. Here’s a detailed breakdown of the prevailing income tax slabs for the financial year 2023-24.

For Individuals Below 60 Years of Age

1. Annual Income Up to ₹2.5 Lakhs: No tax.
2. ₹2,50,001 to ₹5,00,000: 5% of income exceeding ₹2.5 lakhs.
3. ₹5,00,001 to ₹10,00,000: ₹12,500 + 20% of income exceeding ₹5 lakhs.
4. Above ₹10,00,000: ₹1,12,500 + 30% of income exceeding ₹10 lakhs.

For Senior Citizens (60 to 80 Years of Age)

1. Annual Income Up to ₹3 Lakhs: No tax.
2. ₹3,00,001 to ₹5,00,000: 5% of income exceeding ₹3 lakhs.
3. ₹5,00,001 to ₹10,00,000: ₹10,000 + 20% of income exceeding ₹5 lakhs.
4. Above ₹10,00,000: ₹1,10,000 + 30% of income exceeding ₹10 lakhs.

For Super Senior Citizens (Above 80 Years of Age)

1. Annual Income Up to ₹5 Lakhs: No tax.
2. ₹5,00,001 to ₹10,00,000: 20% of income exceeding ₹5 lakhs.
3. Above ₹10,00,000: ₹1,00,000 + 30% of income exceeding ₹10 lakhs.

Short Term Capital Gains Tax

Short-term capital gains tax arise when assets are sold within 36 months of acquisition. The income from these capital gains is subject to taxation based on the taxpayer’s slab rate. However, if the capital gains are from equity shares or equity-oriented mutual funds (where Securities Transaction Tax has been paid), the tax rate is different.

STCG on Non-Equity Assets

The gains are added to the total income and taxed as per the individual’s applicable slab rate.

STCG on Equity and Equity-Oriented Funds

• Tax Rate: 15% of the gains.

Case Example of Tax Calculation

Consider an individual below 60 years with a total annual income of ₹12,00,000 and STCG of ₹1,00,000 from equity shares.

Step 1: Calculate Tax on Regular Income

1. Income ≤ ₹2.5 Lakhs: No tax.
2. ₹2,50,001 to ₹5,00,000: ₹2,50,000 × 5% = ₹12,500
3. ₹5,00,001 to ₹10,00,000: ₹5,00,000 × 20% = ₹1,00,000
4. Above ₹10,00,000: ₹2,00,000 × 30% = ₹60,000

Total Tax on Regular Income = ₹12,500 + ₹1,00,000 + ₹60,000 = ₹1,72,500

Step 2: Calculate STCG on Equity Shares

• STCG = ₹1,00,000 × 15% = ₹15,000

Step 3: Add both taxes

Total Tax Payable = ₹1,72,500 + ₹15,000 = ₹1,87,500

Step 4: Deduct Eligible Rebates if any

For example, if the individual has availed of a rebate under Section 87A (for total income less than ₹5 lakhs), up to ₹12,500 can be deducted from the total tax.

However, in this example, the rebate is not applicable as the total income is above ₹5 lakhs.

Thus, the final tax payable = ₹1,87,500.

Conclusion

Understanding the current income tax slabs and short-term capital gains tax is crucial for effective tax planning. The Indian taxation framework is designed to ensure equitable contribution, and taxpayers should be aware of the applicable slabs and rates. Given the nuances of tax calculations and the dynamic nature of fiscal policies, it is advisable to remain informed and periodically review tax obligations.

Summary

Understanding the current income tax slabs is essential for proper financial planning. For the financial year 2023-24, individuals below 60 years with an annual income up to ₹2.5 lakhs are exempt from tax. Income between ₹2,50,001 to ₹5,00,000 is taxed at 5%, ₹5,00,001 to ₹10,00,000 at 20%, and above ₹10,00,000 at 30%. For senior citizens, the exempt threshold is ₹3 lakhs, and for super seniors, it is ₹5 lakhs. Short-term capital gains tax is levied at 15% for equity shares, while gains from other assets are taxed as per the income slab rate.Disclaimer: This article provides an overview of the current income tax slabs and short-term capital gains tax in India. Taxpayers should consult financial experts and consider personal circumstances before making financial decisions. Investments and trading in the Indian financial market involve various risks, and understanding the implications is crucial.