Basic exemption limits and tax rates applicable to individuals

As per section 4 of income tax act 1961, the total income of the previous year of an assessee shall be charged to income tax at the rates prescribed in the finance act as applicable to the relevant assessment year.

Even though, rates are prescribed in finance act, income shall be charged in accordance with and subject to the provisions of the income tax act. Before getting into rates of income tax, you should first understand the concept of basic exemption limit in Income tax.

What is basic exemption limit

Basic exemption limit is the amount of taxable income on which you are not required to pay tax. This means tax rate on an amount equal or less than basic exemption limit is Nil.

Basic exemption limit has been set for an individual based on his age and residential status. For this purpose, a resident individual based on age has been divided into following three categories;

• Below the age of 60 years
• 60  years of age and above, but below 80 years – resident individual within this age limit are known as “senior citizens”.
• Above 80 years of age – Resident Individual falling into this category are known as “super senior citizens”.

The above mentioned age limit has to be attended at any time during the previous year.

This means, if you have attended 60 years of age during the previous year 2021-22, then you will be considered as a senior citizen for the financial year 2021-22 relevant to the assessment year 2022-23. Same logic is also applicable to financial year 2022-23 (assessment year 2023-24) as no changes are made to this limit.

Here is the basic exemption limit applicable to individuals for the financial year 2021-22 and 2022-23;

For non-resident individuals (NRI), the basic exemption limit is Rs. 2,50,000 irrespective of age of the assessee.

Rate of tax for an Individual

For the financial year 2021-22 (assessment year 2022-23) and financial year 2022-23 (Assessement year 2023-24), the income tax rate is as follows;

Income tax slabs for resident individual below 60 years of age :-

Income tax slabs for a senior citizen (a resident individual who is between 60 and 80 years of age) :-

Income tax slabs for a super senior citizen (a resident individual who is above 80 years of age) :-

Please remember, above basic exemption limit and rate of tax shall applicable to both men and women.

Government has allowed tax payer to choose between old tax regime and new tax regime as per the provisions of section 115BAC. If you choose new tax regime, then tax rates applicable to you are mentioned below. However, you will not be allowed to claim all most all tax deductions and exemption applicable to an individual.

Here are the tax rates in new tax regime under section 115BAC;

Surcharge, Health and Education Cess

Surcharge is charged on above tax rates if net income exceeds Rs 50 Lakh. Surcharge at the rate of 10% on above basic tax rates is to be charges when net income exceeds Rs 50 Lakhs but below Rs 1 Crore.

Instead of 10%, surcharge has to be charged at the rate of 15% if the net income exceeds Rs 1 Crore. Thereafter it increased based on your income. Here are the surcharge rates applicable for the financial year 2021-22 and 2022-23.

The amount of income tax shall be increased by a surcharge at the following rates;

Please remember that the surcharge at above rate is levied before levy of health and education cess.

Health and education cess has been levied on the aggregate amount of tax and surcharge payable, at the rate of 4%.

If surcharge is not applicable to the individual, then health and education cess at the rate of 4% has to be charged on aggregate amount of tax.

Tax Rebate Under Section 87A

For the financial year 2021-22 (assessment year 2022-23) and financial year 2022-23 (assessment year 2023-24), you are eligible for a tax rebate under section 87A if your taxable income is equal to or less than Rs 5,00,000.

The amount of rebate that can be claimed under section 87A is 100% of the tax calculated on taxable income or Rs 2,500, whichever is less. 87A rebate is deductible before charging cess.

If after deduction, your tax liability is nil, then cess will also be calculated as nil, as a result you are not required to pay any tax.

Example to understand how tax liability is calculated

Example -1

For example, Mr X is a resident individual has disclosed us following details to calculate his tax liability;

• Gross total income – Rs 10,50,000
• Age – 59 years
• Insurance premium paid during the year – Rs. Rs. 10,000

Here is the computation of Mr. X for the financial year 2021-22 (assessment year 2022-23) and financial year 2022-23 (assessment year 2023-24) asssuming he has selected tax rates under old tax regime.

Note: Surcharge and rebate under section 87A not applicable as taxable income does not exceed the specified limit.

Example – 2

Mr Y is working in a company XYZ pvt limited and getting taxable salary of Rs 10, 90,000. Amount invested in Life insurance policy with LIC is Rs 10,000. Below is his calculation for the assessment year 2022-23 ( i.e. financial year 2021-22).

Above calculation will not change for the financial year 2022-23 (assessment year 2023-24) as there was no changes to tax rates and provisions applicable to above calculation.

Income Tax act,1961 also prescribe specified rates for certain types of income. For instance, section 112 prescribes rate of tax as 20% in respect to long term capital gains.