The federal government increased the income tax rate for people earning Rs200,000 or above per month in the federal budget for the fiscal year 2023-24.
The government also reduced the number of tax slabs from seven to six. This means an additional tax burden for people earning Rs500,000 per month or above.
The new tax slab took effect from July 1 and higher tax detection began with salary employees received in August.
In some cases, the take-home or net salary for bosses will be slightly more than what their immediate juniors will be drawing from their payroll accounts, even if on paper they enjoy a visible higher income.
How the new tax rate have affected your post-tax earnings and how much tax you will be paying annually, you can instantly calculate using the calculator below.
We have also reproduced the next tax slab as laid out in the finance bill for FY 2023-24.
S. No | Annual taxable income | Tax rate (2023-24) |
|---|---|---|
1 | Taxable income does not exceed Rs600,000 | 0% |
2 | Taxable income exceeds Rs600,000 but does not exceed Rs1,200,000 | 2.5% of the amount exceeding Rs600,000 |
3 | Taxable income exceeds Rs1,200,000 but does not exceed Rs2,400,000 | Rs15,000 + 12.5% of the amount exceeding 1,200,000 |
4 | Taxable income exceeds Rs2,400,000 but does not exceed Rs3,600,000 | Rs165,000 + 22.5% of the amount exceeding Rs2,400,000 |
5 | Taxable income exceeds Rs3,600,000 but does not exceed Rs6,000,000 | Rs435,000 +27.5% of the amount exceeding Rs3,600,000 |
6 | Taxable income exceeds Rs6,000,000 | Rs1,095,000 + 35% of the amount exceeding Rs6,000,000 |
The government has reduced the number of slabs from seven to six, ending the slab that covered annual income between Rs6 million and Rs12 million.
People earning between Rs500,000 and Rs1,000,000 per month were paying Rs1,005,000 + 32.5% of the amount exceeding Rs. 6,000,000 in annual tax. Now, they have been subjected to a higher rate of 35% for all income exceeding Rs6,000,000 per annum. They will also pay a fixed amount of Rs1,095,000.
On the other hand, people who previously fell in the final slab of Rs12 million and above annual income will now enjoy a tax benefit. They were previously paying Rs2,955,000 in fixed income tax and 35% on the amount exceeding Rs. 12,000,000.
The fixed portion of the income tax for them has be reduced by almost Rs100,000.
