I'm a 30-year-old, and my income is Rs 7.25 lakh. I opted for the new tax regime. What is my tax liability?

I’m a 30-year-old, and I earn an annual taxable salary of Rs 7.25 lakh. This year I thought to switch to the new tax regime. Could you help me calculate my tax amount?

—Name withheld

Reply Archit Gupta, Founder and CEO, Clear

In the current financial year, for taxpayers aged below 60, the new tax slabs and rates are as follows:

Income up to Rs 2.5 lakh: No tax

Income from Rs 2,50,001 to Rs. 5,00,000: 5% of the income exceeding Rs 2.5 lakh (tax rebate u/s 87A is available)

Income from Rs 5,00,001 to Rs. 7,50,000: 10% of the income exceeding Rs 5 lakh

Income from Rs 7,50,001 to Rs. 10,00,000: 15% of the income exceeding Rs 7.5 lakh

Income from Rs 10,00,001 to Rs. 12,50,000: 20% of the income exceeding Rs 10 lakh

Income from Rs 12,50,001 to Rs. 15,00,000: 25% of the income exceeding Rs 12.5 lakh

Income from Rs 15,00,001 and above 30% of the income exceeding Rs 15 lakh

Calculation of tax to be paid while filing ITR

Previous Year- 2022-23

Assessment Year-2023-24

The new tax regime is the default tax regime for the assessment year 2023-24. Tax rates under the new tax regime are as follows:

And for the assessment year 2023-24, the health and education cess is 4% of the income tax and Surcharge. Assuming this person has not yet claimed a standard deduction, in that case, the tax is zero. Due to rebate available under the Section 87A.  However, if this person has already claimed the standard deduction and Rs 7.25 lakh is net of the standard deduction, in that case, tax shall be calculated on Rs 7.25 lakh which is Rs 36,400.

Let’s now calculate your tax liability based on your taxable salary of Rs. 7.25 lakh: 

Income up to Rs 2.5 lakh: No tax

Income from Rs 2,50,001 to Rs 5,00,000: 5% of (Rs 5,00,000 - Rs 2,50,000) = Rs 12,500

Income from Rs 5,00,001 to Rs 7,25,000: 10% of (Rs 7,25,000 - Rs 5,00,000) = Rs 22,500

Total tax liability = Rs 12,500 + Rs 22,500 = Rs 35,000

Including 4% cess, it will be Rs 36,400.

Thus, before filing your ITR, it is essential to verify these computations and consider any other factors that may impact your tax liability.

(The views expressed by investment/tax expert is his/her own)

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