In a major boost to taxpayers in the PM Modi-led government's last full Union Budget before the country goes to polls next year, FM Sitharaman has provided some relief to the common man's pocket.??
At present, those with income of up to Rs 5 lakh do not pay any income tax?in either the old or new tax regimes, thanks to the rebate under Section 87A. However, FM Sitharaman has proposed raising the rebate limit to Rs 7 lakh in the new tax regime.??
So, people in the new tax regime with income up to Rs 7 lakh will not have to pay any tax at all.?
FM Sitharaman has also proposed to change the tax structure in the new regime by reducing the number of slabs?from seven to six, and increase the tax exemption limit to Rs 3 lakh.?
The new proposed tax rates are:?
Up to Rs 3 lakh: NIL
Rs 3 lakh- Rs 6 lakh: 5%
Rs 6 lakh-Rs 9 lakh: 10%
Rs 9 lakh-Rs 12 lakh: 15%
Rs 12 lakh- Rs 15 lakh: 20%
Over Rs 15 lakh: 30%
The existing tax slabs for new tax regime are these:
Upto Rs 2.5 lakh-NIL
Rs 2.5 lakh- Rs 5 lakh- 5%
Rs 5 lakh- Rs 7.5 lakh-10%
Rs 7.5 lakh- Rs 10 lakh-15%
Rs 10 lakh- Rs 12.5 lakh-20%
Rs 12.5 lakh- Rs 15 lakh-25%
Above Rs 15 lakh-30%
"This will provide major relief to all tax payers in the new regime. An individual with an annual income of Rs 9 lakh will be required to pay only Rs 45,000/-. This is only 5 per cent of his or her income. It is a reduction of 25 per cent on what he or she is required to pay now, ie, Rs 60,000/-. Similarly, an individual with an income of Rs 15 lakh would be required to pay only Rs 1.5 lakh or 10 per cent of his or her income, a reduction of 20 per cent from the existing liability of Rs 1,87,500/", said FM Sitharaman in her Budget 2023 speech.
"We are also making the new income tax regime as the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime" FM Sitharaman said.
Currently the highest tax rate in our country is 42.74 per cent. This is among the highest in the world. FM Sitharaman has proposed to reduce the highest surcharge rate from 37 per cent to 25 per cent in the new tax regime. This would result in reduction of the maximum tax rate to 39 per cent.?
Another proposal by FM Sitharaman is for the salaried class and the pensioners including family pensioners, for whom she proposes to extend the benefit of standard deduction to the new tax regime. Each salaried person with an income of Rs 15.5 lakh or more will thus stand to benefit by Rs 52,500.?
"The limit of Rs 3 lakh for tax exemption on leave encashment on retirement of non-government salaried employees was last fixed in the year 2002, when the highest basic pay in the government was Rs 30,000/- pm. In line with the increase in government salaries, I am proposing to increase this limit to Rs 25 lakh," FM Sitharaman said in her speech.