Income Tax Slab

Income Tax Slab refers to the range of income levels on which different tax rates are applied. As income increases, higher portions of income are taxed at higher rates—this is known as progressive taxation.

Tax slabs determine how much tax you pay based on your total taxable income.

1. Old Tax Regime Slabs

Under the old regime (with deductions and exemptions):

• Up to ₹2.5 lakh → Nil
• ₹2.5 lakh to ₹5 lakh → 5%
• ₹5 lakh to ₹10 lakh → 20%
• Above ₹10 lakh → 30%

Additional benefits:

• Rebate under Section 87A (if income up to ₹5 lakh)
• Deductions like 80C, 80D, HRA, etc. allowed

2. New Tax Regime Slabs

Under the new regime (lower rates, fewer deductions):

• Up to ₹3 lakh → Nil
• ₹3 lakh to ₹6 lakh → 5%
• ₹6 lakh to ₹9 lakh → 10%
• ₹9 lakh to ₹12 lakh → 15%
• ₹12 lakh to ₹15 lakh → 20%
• Above ₹15 lakh → 30%

Additional benefit:

• Rebate under Section 87A (if income up to ₹7 lakh, subject to conditions)

3. How Tax Slabs Work

Tax is not applied on total income at one rate.

Instead, income is taxed in parts:

$\text{Total Tax}=\sum (\text{Income in each slab}\times \text{Applicable rate})$

This means only the portion of income falling in a higher slab is taxed at a higher rate.

4. Surcharge and Cess

• Surcharge: Applies on higher income levels
• Health & Education Cess: 4% on total tax

These increase the final tax payable.

5. Choosing the Right Regime

• Old regime: Better if you have significant deductions
• New regime: Better if you have fewer deductions and want simplicity

Choice should be based on actual calculation, not assumption.

6. Common Mistakes

• Thinking entire income is taxed at highest slab rate
• Not comparing old vs new regime
• Ignoring rebate eligibility
• Missing deductions under old regime

Practical Insight

Most people pick a regime based on hearsay.

That’s where they lose money.

The right approach:

• compute tax under both regimes
• compare actual liability
• choose what saves more, not what sounds simpler

How N D Savla & Associates Can Help

At N D Savla & Associates, we help you:

• Calculate tax under both regimes
• Identify optimal deductions and savings
• Plan income structure for lower tax outgo
• Ensure accurate and compliant filing