Income tax is a tax levied by the Government of India on the income of a person. The provisions governing the income tax are covered in the Income Tax Act, 1961, and the rules made under it. The Income Tax Act consists of various chapters that include provisions relating to the determination of the residential status of a person in India, exemptions, computation of total income, deductions, determination of tax liability, filing of income tax returns, procedures for assessments, penalties, prosecutions, and more. The income tax liability of a taxpayer is calculated based on their total income. For tax calculation purposes, a taxpayer’s total income is divided between normal income and special income. The normal income of a taxpayer is taxed as per the applicable tax rates prescribed every year under the Finance Act. Additionally, the government has introduced alternate tax regimes that offer taxpayers the option to pay taxes at reduced rates in exchange for foregoing certain exemptions or deductions.
Tax Rates Under the Normal Tax Regime for Individuals and HUF
An individual or a Hindu Undivided Family is not liable to pay tax if their normal income does not exceed the maximum exemption limit. The basic exemption limit and tax rates for individuals vary depending on their age during the relevant financial year. The applicable tax rates for individuals and HUFs under the normal tax regime are explained below.
Tax Rates for Individuals Below 60 Years and HUFs
Net income up to Rs. 2,50,000 is exempt from tax. For income from Rs. 2,50,001 to Rs. 5,00,000, the tax rate is 5 percent. Income from Rs. 5,00,001 to Rs. 10,00,000 is taxed at 20 percent, and income exceeding Rs. 10,00,000 is taxed at 30 percent.
Tax Rates for Senior Citizens
A senior citizen is defined as an individual who is 60 years or more but less than 80 years old at any time during the previous year. Net income up to Rs. 3,00,000 is exempt. Income from Rs. 3,00,001 to Rs. 5,00,000 is taxed at 5 percent. Income from Rs. 5,00,001 to Rs. 10,00,000 is taxed at 20 percent, and income exceeding Rs. 10,00,000 is taxed at 30 percent.
Tax Rates for Super Senior Citizens
A super senior citizen is defined as an individual aged 80 years or more at any time during the previous year. Net income up to Rs. 5,00,000 is exempt from tax. Income from Rs. 5,00,001 to Rs. 10,00,000 is taxed at 20 percent, and income exceeding Rs. 10,00,000 is taxed at 30 percent.
Alternate Tax Regime Under Section 115BAC
The Income Tax Act provides a progressive tax system, where the rate of tax increases with the level of income. The general slab rates applicable to individuals or HUFs are 5 percent, 20 percent, and 30 percent, with the highest slab rate applying to income over Rs. 10,00,000. The Finance Act, 2020, introduced a new Section 115BAC, which provides an alternative tax regime for individuals and HUFs. This regime features significantly reduced tax rates, but to benefit from it, the assessee must give up specified exemptions and deductions. Under the Union Budget 2023, the exemption limit and tax brackets in the new regime were revised. Additionally, salaried employees are now eligible for standard deduction even when opting for the new regime.
Tax Rates for Individuals and HUFs Opting for the Alternate Tax Regime
For the financial year 2022-23, the tax rate is nil for income up to Rs. 2,50,000. Income from Rs. 2,50,001 to Rs. 3,00,000 is taxed at 5 percent. Income from Rs. 3,00,001 to Rs. 5,00,000 is taxed at 5 percent. Income from Rs. 5,00,001 to Rs. 6,00,000 is taxed at 10 percent. Income from Rs. 6,00,001 to Rs. 7,50,000 is taxed at 10 percent. Income from Rs. 7,50,001 to Rs. 9,00,000 is taxed at 15 percent. Income from Rs. 9,00,001 to Rs. 10,00,000 is taxed at 15 percent. Income from Rs. 10,00,001 to Rs. 12,00,000 is taxed at 20 percent. Income from Rs. 12,00,001 to Rs. 12,50,000 is taxed at 20 percent. Income from Rs. 12,50,001 to Rs. 15,00,000 is taxed at 25 percent. Income above Rs. 15,00,000 is taxed at 30 percent.
For the financial year 2023-24, the tax rate is nil for income up to Rs. 3,00,000. Income from Rs. 3,00,001 to Rs. 6,00,000 is taxed at 5 percent. Income from Rs. 6,00,001 to Rs. 9,00,000 is taxed at 10 percent. Income from Rs. 9,00,001 to Rs. 12,00,000 is taxed at 15 percent. Income from Rs. 12,00,001 to Rs. 15,00,000 is taxed at 20 percent. Income exceeding Rs. 15,00,000 is taxed at 30 percent.
Rebate Under Section 87A
Under the old tax regime, a resident individual is allowed a tax rebate under section 87A if their total income does not exceed Rs. 5,00,000. The rebate is allowed up to Rs. 12,500. Therefore, if the calculated tax before cess is less than or equal to Rs. 12,500, the entire amount can be claimed as a rebate. Under the new tax regime, the rebate under section 87A is available to resident individuals whose total income does not exceed Rs. 7,00,000. The rebate is allowed up to Rs. 25,000. If the income exceeds Rs. 7,00,000, no rebate is available.
Tax Rates for Association of Persons, Body of Individuals, and Artificial Juridical Persons
Various entities like joint ventures, trusts, and societies are taxable under the status of an Association of Persons or a Body of Individuals. These entities are generally not liable to tax if their normal income is within the basic exemption limit. An artificial juridical person is an entity like a Bar Council, which is recognized by law as capable of holding property and being sued. The tax rates applicable to these entities are the same as those for individuals below 60 years of age. Net income up to Rs. 2,50,000 is exempt. Income from Rs. 2,50,001 to Rs. 5,00,000 is taxed at 5 percent. Income from Rs. 5,00,001 to Rs. 10,00,000 is taxed at 20 percent. Income above Rs. 10,00,000 is taxed at 30 percent.
Alternate Tax Regime for AOP, BOI, and AJP Under Section 115BAC
The alternate tax regime under section 115BAC, initially introduced for individuals and HUFs, has also been made applicable to AOPs, BOIs, and AJPs starting from the financial year 2023-24. These entities, if opting for the new regime, will be taxed at the following rates. Income up to Rs. 3,00,000 is exempt. Income from Rs. 3,00,001 to Rs. 6,00,000 is taxed at 5 percent. Income from Rs. 6,00,001 to Rs. 9,00,000 is taxed at 10 percent. Income from Rs. 9,00,001 to Rs. 12,00,000 is taxed at 15 percent. Income from Rs. 12,00,001 to Rs. 15,00,000 is taxed at 20 percent. Income above Rs. 15,00,000 is taxed at 30 percent.
Tax Rates for Domestic Companies
The Income Tax Act allows domestic companies to select a suitable taxation regime, subject to specific conditions. Companies can opt for concessional tax rates under sections 115BA, 115BAA, and 115BAB, depending on the nature of their business and whether they claim certain deductions or exemptions.
Domestic Company Opting for Section 115BA
A domestic company that satisfies the following conditions can opt for taxation under section 115BA:
The company is incorporated on or after March 1, 2016.
It is engaged in the manufacture or production of any article or thing.
It does not claim specified exemptions, incentives, or deductions.
Such a company is liable to pay income tax at the rate of 25 percent on its total income.
Domestic Company Opting for Section 115BAB
A domestic manufacturing company can opt for the reduced tax rate under section 115BAB if it meets these criteria:
The company is incorporated on or after October 1, 2019.
It is engaged in the manufacture or production of any article or thing.
It commences manufacturing on or after October 1, 2019, but before March 31, 2024.
It does not claim specified exemptions, incentives, or deductions.
If these conditions are fulfilled, the company will be taxed at the following rates:
15 percent on income from manufacturing activities and short-term capital gains on depreciable assets.
22 percent on income from non-manufacturing activities and short-term capital gains from non-depreciable assets.
Domestic Company Opting for Section 115BAA
A domestic company that chooses not to claim specified exemptions, deductions, or incentives can opt for taxation under section 115BAA. The applicable tax rate under this provision is 22 percent on total income.
Tax Rates for Companies Based on Turnover
Under the First Schedule to the Finance Act, the applicable tax rate for domestic companies depends on their turnover or gross receipts.
If the total turnover or gross receipts during the financial year 2021-22 do not exceed Rs. 400 crores, the tax rate is 25 percent.
For any other domestic company, the standard tax rate is 30 percent.
Tax Rates for Foreign Companies
A foreign company is taxed at a flat rate of 40 percent on its taxable income earned in India. This applies irrespective of the level of income or the nature of business operations.
Taxation of Co-operative Societies
General Taxation of Co-operative Societies
Co-operative societies are subject to slab-based taxation. The highest slab rate applicable is 30 percent, which applies when the total income exceeds Rs. 20,000. The tax rates under the normal regime are as follows:
Income up to Rs. 10,000 is taxed at 10 percent.
Income from Rs. 10,001 to Rs. 20,000 is taxed at 20 percent.
Income above Rs. 20,000 is taxed at 30 percent.
Taxation Under Section 115BAD
Section 115BAD, introduced by the Finance Act, 2020, offers an alternative tax regime for resident co-operative societies. Under this regime, the society is taxed at a flat rate of 22 percent. Additionally, a surcharge of 10 percent is levied on the income tax, regardless of the level of income. To benefit from this regime, the society must forgo various deductions and exemptions.
Taxation Under Section 115BAE
Section 115BAE was introduced for new manufacturing co-operative societies set up on or after April 1, 2023, and commencing manufacturing or production on or before March 31, 2024. The applicable tax rates under this regime are:
15 percent for income from manufacturing activities.
22 percent for income from non-manufacturing activities.
15 percent on short-term capital gains from depreciable assets.
22 percent on short-term capital gains from non-depreciable assets.
30 percent on excess profits derived from arranged affairs.
Special incomes are taxed at special rates.
Surcharge is levied at 10 percent on the amount of income tax. Additionally, health and education cess at the rate of 4 percent is charged on the sum of income tax and surcharge.
Taxation of Partnership Firms and LLPs
A partnership firm, including a Limited Liability Partnership, is taxed at a flat rate of 30 percent on its taxable income. There is no slab-based taxation in this case.
Taxation of Local Authorities
Local authorities are also taxed at a flat rate of 30 percent on their taxable income.
Surcharge Rates
Surcharge for Individuals, HUFs, AOPs, BOIs, and AJPs
Surcharge is an additional tax levied on the amount of income tax. For assessment year 2024-25, the surcharge rates applicable to individuals, Hindu Undivided Families, associations of persons, bodies of individuals, and artificial juridical persons are as follows:
For total income up to Rs. 50 lakhs, no surcharge is applicable.
For income between Rs. 50 lakhs and Rs. 1 crore, the surcharge rate is 10 percent.
For income between Rs. 1 crore and Rs. 2 crores, the surcharge rate is 15 percent.
For income between Rs. 2 crores and Rs. 5 crores, the surcharge rate is 25 percent.
For income above Rs. 5 crores, the surcharge rate is 37 percent.
However, in the case of individuals opting for the alternate tax regime under section 115BAC, the maximum applicable surcharge rate is restricted to 25 percent instead of 37 percent. Additionally, if the income consists of short-term capital gains under section 111A or 115AD, or long-term capital gains under section 112A, 112, or 115AD, the maximum surcharge on such gains is capped at 15 percent. In the case of unexplained income under section 115BBE, the surcharge is fixed at 25 percent regardless of income level. For AOPs where all members are companies, the surcharge rate cannot exceed 15 percent.
Surcharge for Companies
For assessment year 2024-25, surcharge rates applicable to companies are based on their total income and the tax regime they opt for:
A domestic company opting for section 115BA pays a surcharge of 7 percent if income exceeds Rs. 1 crore but does not exceed Rs. 10 crores. If income exceeds Rs. 10 crores, the surcharge is 12 percent.
A domestic company opting for sections 115BAA or 115BAB pays a flat surcharge of 10 percent, regardless of income level.
Any other domestic company pays a surcharge of 7 percent on income between Rs. 1 crore and Rs. 10 crores, and 12 percent on income above Rs. 10 crores.
A foreign company pays a surcharge of 2 percent if income exceeds Rs. 1 crore but does not exceed Rs. 10 crores. If income exceeds Rs. 10 crores, the surcharge is 5 percent.
In cases involving unexplained income under section 115BBE, a surcharge of 25 percent is applicable, irrespective of income level.
Surcharge for Firms, LLPs, and Local Authorities
A partnership firm, LLP, or local authority is subject to the following surcharge rates:
No surcharge is applicable if income is up to Rs. 1 crore.
A surcharge of 12 percent is applicable if income exceeds Rs. 1 crore, regardless of the amount by which it exceeds.
For resident co-operative societies opting for the alternate tax regimes under sections 115BAD or 115BAE, the surcharge is fixed at 10 percent of the income tax, irrespective of the total income.
Income Tax Slab Rates for Senior and Super Senior Citizens Under the Old Regime
The Indian income tax system provides relief for senior citizens (aged 60 years or above but less than 80 years) and super senior citizens (aged 80 years or above) under the old tax regime. These higher exemption limits help reduce tax liability for older taxpayers.
Senior Citizens (Aged 60 to less than 80 years)
For financial year 2023-24 (assessment year 2024-25), the following slab rates apply to resident individuals aged 60 years or more but below 80 years who opt for the old tax regime:
- Up to ₹3,00,000: Nil
- ₹3,00,001 to ₹5,00,000: 5%
- ₹5,00,001 to ₹10,00,000: 20%
- Above ₹10,00,000: 30%
The basic exemption limit is increased to ₹3,00,000 for senior citizens under the old regime.
Super Senior Citizens (Aged 80 years and above)
For super senior citizens (residents aged 80 years or above), the income tax slab rates under the old tax regime for FY 2023-24 are:
- Up to ₹5,00,000: Nil
- ₹5,00,001 to ₹10,00,000: 20%
- Above ₹10,00,000: 30%
The basic exemption limit is enhanced to ₹5,00,000, offering considerable tax relief to individuals in this age group.
Rebate under Section 87A for Senior and Super Senior Citizens
Even with the increased basic exemption limits, eligible resident individuals (including senior and super senior citizens) with total income up to ₹5,00,000 can claim a rebate under section 87A. The maximum rebate available is ₹12,500, effectively nullifying any tax liability for income up to ₹5,00,000.
Surcharge and Health & Education Cess
In addition to the basic income tax, a surcharge and health & education cess are levied on the tax amount based on the taxpayer’s income level.
Surcharge Rates (Applicable to all regimes)
- 10% of income tax if total income exceeds ₹50 lakh but does not exceed ₹1 crore
- 15% of income tax if total income exceeds ₹1 crore but does not exceed ₹2 crore
- 25% of income tax if total income exceeds ₹2 crore but does not exceed ₹5 crore (only in the old regime)
- 37% of income tax if total income exceeds ₹5 crore (only in the old regime)
- Capped at 25% in the new tax regime (even if income exceeds ₹5 crore)
Health and Education Cess
A 4% cess is levied on the income tax amount (including surcharge, if applicable) under both the old and new regimes. This is intended to fund health and education initiatives of the government.
Key Differences Between Old and New Regimes
The choice between the old and new income tax regimes largely depends on individual financial circumstances, deductions claimed, and income levels. Some important distinctions include:
- Exemptions and Deductions: The old regime permits multiple deductions such as HRA, standard deduction, 80C, 80D, home loan interest, etc. The new regime offers lower tax rates but forgoes most of these deductions.
- Slab Rates: The new regime has more granular tax slabs with reduced rates, while the old regime has broader slabs with higher rates.
- Rebate Threshold: Under the new regime, the rebate under section 87A is applicable up to income of ₹7,00,000; in the old regime, it is applicable only up to ₹5,00,000.
- Surcharge Cap: The new regime caps surcharge at 25%, providing a tax advantage for high-income individuals.
Taxation for Hindu Undivided Families (HUFs), Firms, LLPs, and Companies
The income tax slab rates and provisions vary significantly depending on the type of taxpayer entity. The following summarizes how income tax is applied for HUFs, partnership firms, LLPs, and companies for the financial year 2023–24 (assessment year 2024–25).
Hindu Undivided Family (HUF)
HUFs are taxed in the same manner as individual taxpayers under both old and new regimes. The slab rates and rebate provisions applicable to individuals also apply to HUFs. An HUF can also opt for either regime, based on which option results in lower tax liability.
Partnership Firms and LLPs
Partnership firms and LLPs are taxed at a flat rate of 30% of total income. This rate applies regardless of income level. No slab system is followed.
Additional taxes:
- Surcharge: 12% of income tax if total income exceeds ₹1 crore
- Health and Education Cess: 4% on the tax plus surcharge
Partnership firms and LLPs are not allowed to opt for the concessional new regime as applicable to individuals.
Companies
Domestic companies are taxed at different rates depending on their turnover and the regime they opt for.
Domestic Companies
- If turnover or gross receipts ≤ ₹400 crore (FY 2021–22): 25%
- If turnover > ₹400 crore: 30%
Section 115BAA (Optional Concessional Regime)
A domestic company can opt for a concessional tax rate of 22% under section 115BAA, provided it forgoes certain deductions and incentives. The effective tax rate, including surcharge (10%) and cess (4,%) becomes 25.17%.
Section 115BAB (New Manufacturing Companies)
New manufacturing companies incorporated on or after 1 October 2019 and commencing production before 31 March 2024 can opt for a tax rate of 15% under section 115BAB. The effective tax rate, including surcharge (10%) and cess (4%), is 17.16%.
Minimum Alternate Tax (MAT)
- Rate: 15% of book profits (plus surcharge and cess), applicable to companies not opting for the concessional regime under section 115BAA or 115BAB
- Companies opting for 115BAA or 115BAB are exempt from MAT provisions.on.s
Income Tax for Co-operative Societies
For co-operative societies, slab-based rates apply unless they opt for a concessional regime:
Regular Tax Regime
- Up to ₹10,000: 10%
- ₹10,001 to ₹20,000: 20%
- Above ₹20,000: 30%
Concessional Regimes for Co-operative Societies
- Section 115BAD: 22% tax rate plus surcharge (10%) and cess (4%), with certain deductions and exemptions disallowed
- Section 115BAE: (Applicable from AY 2024–25): 15% rate for new manufacturing co-operative societies registered on or after 1 April 2023 and commencing production before 31 March 2024
Filing Requirements and Due Dates
Taxpayers must file income tax returns (ITRs) if their total income exceeds the exemption limit. The due dates for filing ITR for the financial year 2023–24 are as follows:
- Individual taxpayers / HUF / AOP / BOI (not subject to audit): 31 July 2024
- Businesses requiring audit: 31 October 2024
- Businesses requiring transfer pricing report (Form 3CEB): 30 November 2024
Late filing attracts penalties under section 234F, which can be up to ₹5,000 if filed after the due date but before 31 December, and ₹10,000 thereafter. However, if total income is less than ₹5,00,000, the maximum penalty is ₹1,000.
Choosing Between Old and New Tax Regimes
Taxpayers must evaluate their eligibility for deductions, exemptions, and overall income level before choosing between the old and new regimes.
Key considerations include:
- Claiming deductions under sections 80C, 80D, HRA, LTA, etc.,, supports opting for the old regime
- Taxpayers without significant deductions may benefit from the lower tax rates of the new regime.me
- Salaried individuals can choose between regimes every financial year.
- Business income taxpayers can switch to the new regime only once; thereafter, they must continue with it permanently unless they cease business operations.
Conclusion
The income tax framework for Assessment Year 2024–25 offers taxpayers two distinct regimes — each with its benefits and limitations. The new tax regime simplifies compliance through lower tax rates but requires taxpayers to forgo several commonly claimed exemptions and deductions. The old regime, while comparatively more complex, continues to be beneficial for those who extensively utilize deductions under sections like 80C, 80D, and others.
For individuals and HUFs, the choice of tax regime should be guided by a detailed analysis of total income, applicable deductions, and net tax liability under both systems. For senior citizens, the higher basic exemption limits under both regimes offer additional relief. For businesses, co-operative societies, and companies, flat tax rates and concessional schemes under sections 115BAA, 115BAB, and 115BAE provide new planning opportunities while simplifying tax compliance.