Old Vs New Income Tax Slabs Which One Is Best For Businesses?

What is the Income Tax Slab?

The Indian income tax levies tax on individual taxpayers in our country on the basis of a slab system. A slab system means that different taxpayers are segregated on the basis of the range of their incomes, essentially meaning that the amount of tax payable by individuals increases with an increase in their income. This type of taxation enables a fair and progressive tax from the taxpayers.

The income tax slab rate can be mainly bifurcated as under:

• By Gender
  • Male; and
  • Female
• By Age
  • Resident; and
  • Non-resident in India.
• For Hindu Undivided Family (HUF)/ Association Of Person (AOP)/ Body Of Individual (BOI)/ Artificial Judicial Person (AJP)
• On Non-individuals
  • Partnership Firms or LLPs;
  • Domestic Company;
  • Foreign Company;
  • Co-operative Societies; and
  • Local Authorities.

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New Income Tax Slabs for FY2024-25

The table above gives us a fair idea and comparison of the old vs new tax regime.

To arrive at your total taxable income, you are required to declare all the income you earn under various heads and then subtract any tax deductions that you are eligible for.

Two Options For A Taxpayer

1. New Income Tax Structure – Let go of all exemptions and breaks and avail the lower tax rates
2. Old Income Tax Structure – At the existing income tax rates, benefit from all the exemptions and tax breaks.

Some income tax slabs have been lowered if one foregoes exemptions and breaks in the new regime tax slab structure.

However, there are certain deductions you can still claim using the new regime tax slab and they are as below.

1. Retirement benefits, gratuity etc.
2. commutation of pension
3. leave encashment on retirement
4. retrenchment compensation
5. VRS benefits
6. EPFO: Employer contribution
7. NPS withdrawal benefits
8. Education scholarships
9. Payments of awards instituted in the public interest

Also Read: How To Check Income Tax 2022 –23 Refund Status For Your Business Filing

Most common exemptions and deductions availed by Indian taxpayers

Benefits According to the Government

According to the government, introducing the new tax rates will help them gain a wider base of taxpayers by luring unorganized sectors to start paying taxes at a low base rate. A huge part of the unorganized sector is out of the income tax-paying frame. Bringing them into the bigger picture will help the government reduce the income tax rates in the future.

Now comes the question of which regime should a businessman go for?

Since the eligible deductions, sources and quantum of income differs for every individual, one rule cannot be applied to all. Taxpayers will need to evaluate and compare the tax liability under both regimes and then decide on which to opt for. 

One of the most important things to keep in mind while choosing a tax regime is that taxpayers having income from businesses and professions can withdraw their option only once and they shall not be eligible to opt for the new tax regime unless they cease to have income from business or profession.

Also Read: Why Income Tax Return Filing Is Important

The corporate income tax (CIT) rate applicable to an Indian company and a foreign company for the tax year 2022/23 is as follows:

In the end, in conclusion, there is no right or wrong regime one can choose due to the complex nature of the Indian ta law. Hence it is always advised to look at the figures and facts before making an informed decision.