Budget 2023: The Indian Finance Minister, on Wednesday, in the last budget of the government before the 2024 Lok Sabha elections, announced revised income tax slabs under the new personal income tax regime applicable for the assessment year 2024-25.
In her speech, she proposed to raise the tax rebate from Rs 5 to 7 lakh under the new regime. Also, the Basic exemption limit has been increased to Rs.3 lakh from Rs 2.5 lakh under the new income tax regime.
Notably, the new tax regime has been kept as a “default choice” unless the taxpayer chooses to go with the old regime.
Here Are The Key Takeaways From Budget On Personal Income Tax:
Individual taxpayers pay income tax according to the tax slab they fall under, depending on their annual income.
- People having an annual income of up to ₹7 lac will not pay income tax. Under the new tax regime, the income threshold for claiming a rebate under Section 87A has been raised from Rs.5 lakh to Rs.7 lakh.
- Revised Income Tax Slabs: People earning up to Rs 3 lakh are exempt from paying taxes under the new tax structure. For those earning income between Rs 3 to Rs 6 lakh, an individual income tax of 5 percent will be levied.
Similarly, people with income between Rs 6 to Rs 9 lakh will pay 10 percent tax, Rs 9 to 12 lakh 15 percent tax, and 12 to 15 lakh 20 percent. The highest tax rate of 30 percent will be applicable on annual income exceeding Rs 15 lakh under the new income tax regime.
New Income Tax Slab Rates for Individual Taxpayers:
| Income Tax Slab | Tax Rate |
| Up to Rs.3 lakh | Nil |
| Above Rs.3 lakh – Rs.6 lakh | 5% of the total income |
| Above Rs.6 lakh – Rs.9 lakh | 10% of the total income |
| Above Rs.9 lakh – Rs.12 lakh | 15% of the total income |
| Above Rs.12 lakh – Rs.15 lakh | 20% of the total income |
| Above Rs.15 lakh | 30% of the total income |
- New Regime: A Default Choice: As per the budget for 2023, the new income tax regime will be the default choice. However, the old tax regime will prevail if a person opts for it.
- Old Tax Regime Vs New Tax Structure: The old tax regime provided certain exemptions and deductions in the form of PPF, and NPS, amongst other concessions.
Under the new tax regime, most exemptions and deductions are not available, though standard deduction benefits have been introduced. Tax filing with the new tax regime has become easy and less documentation heavy. The reduced tax limit provides the benefit of more disposable income to people who fail to make investments due to reasons.
India’s gross savings rate was almost 30% in March 2019, with domestic savings contributing a large proportion to the overall rate. Under the old income tax regime, taxpayers hit two birds with a single stone.Not only do they invest to avail deductions, but they also reap maximum benefits of specified tax-saving instruments for future expenses such as marriage, education, purchasing a home, medical emergencies, etc.
So, people earning more than 7 lakh in a year must compare the new and old regimes to their benefit. - Income Tax Calculation: A person with an annual income of ₹9 lakh will pay ₹45,000 tax under the new tax structure instead of Rs 60,000 under the tax structure established for the previous assessment year.
Calculation: Rs 3 to Rs 6 lakh = 5 % Tax = Rs 3L * 5/100 = Rs 15,000Rs 6 to 9 lakh = 10 % Tax = Rs 9L-6L= Rs 3L * 10 /100 = Rs 30,000, which comes out to be a total of Rs 45,000.
Similarly, an individual with an income of Rs 15 lakh will pay Rs 1.5 lakh tax, down from Rs 1.87 lakh under the new tax structure.
- Highest income surcharge has been slashed from 37% to 25%. “The Current tax rate in the country is 42.74%, among the highest in the world. Budget23 proposes to reduce the highest surcharge rate from 37% to 25% in the new tax regime. This will result in the reduction of the maximum tax rate to 39%,” FM Sitharaman announced.
- The tax exemption limit on leave encashment for retired non-government salaried employees has been raised to Rs 25 lakh.
- Individuals with income of ₹15.5 lakh and above would be eligible for a standard deduction of ₹52,500 in the new tax regime in Budget 2023.
- Under the senior citizen savings scheme, the ceiling amount for the investment has increased from Rs 15 lakh to Rs 30 lakh.
“Each salaried person with an income of Rs. 15.5 lakh or more will thus stand to benefit by Rs. 52,500/-. At present, a standard deduction of Rs. 50,000/- to salaried individuals and deduction from family pension up to Rs. 15,000/- is currently allowed only under the old regime.“