Budget 2023: No Income Tax Up To Rs 7 Lakh Annual Income In New Tax Regime
I propose to change the tax structure in this regime by reducing the number of slabs to five and increasing the tax exemption limit to Rs 3 lakh, Sitharaman said
Finance Minister Nirmala Sitharaman on Wednesday presented the Union Budget for the fiscal year 2023-24. The minister has announced some major schemes and reforms. On the tax front, the government announced several changes.
Income tax rebate extended on income up to Rs 7 lakhs in the new tax regime, Finance Minister Nirmala Sitharaman said.
"I introduced in 2020, the new personal income tax regime with 6 income slabs, starting from Rs 2.5 Lakhs. I propose to change the tax structure in this regime by reducing the number of slabs to 5 and increasing the tax exemption limit to Rs 3 Lakhs, " Nirmala Sitharaman said.
Finance Minister started the personal tax speech with saying "Now, I come to what everyone is waiting for -- personal income tax. I have five major announcements to make in this regard. These primarily benefit our hard-working middle class."
She said, "The first one concerns rebate. Currently, those with income up to Rs 5 lakh do not pay any income tax in both old and new tax regimes. I propose to increase the rebate limit to Rs 7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to Rs 7 lakh will not have to pay any tax."
The second proposal relates to middle-class individuals. I had introduced, in the year 2020, the new personal income tax regime with six income slabs starting from Rs 2.5 lakh. I propose to change the tax structure in this regime by reducing the number of slabs to five and increasing the tax exemption limit to Rs 3 lakh, Sitharaman said.
The new tax rates are:
Rs 0-3 lakh Nil
Rs 3-6 lakh 5 per cent
Rs 6-9 lakh 10 per cent
Rs 9-12 lakh 15 per cent
Rs 12-15 lakh 20 per cent
Rs 15 lakh 30 per cent
"This will provide major relief to all taxpayers 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/, " Sitharaman said.
My third proposal is for the salaried class and the pensioners including family pensioners, for whom I propose to extend the benefit of 34 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 ` 52,500, she said.
My fourth announcement in personal income tax is regarding the highest tax rate which in our country is 42.74 per cent. This is among the highest in the world. I propose 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, FM added.
"Lastly, 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 further added.
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. Apart from these, I am also making some other changes as given in the annexure.
As a result of these proposals, the revenue of about Rs 38,000 crore – Rs 37,000 crore in direct taxes and Rs 1,000 crore in indirect taxes – will be forgone while revenue of about Rs 3,000 crore will be additionally mobilized. Thus, the total revenue forgone is about Rs 35,000 crore annually, Sitharaman said.
Nirmala Sitharaman said, "The revised fiscal deficit is at 6.4 Per cent of GDP."
Fiscal deficit pegged at 5.9 per cent of GDP for FY24, said FM Sitharaman
To finance fiscal deficit in 2023-24, net market borrowing from dated securities estimated at Rs 11.8 lakh cr.
"I propose to reduce the number of basic custom duty rates on goods other than textiles and agriculture, from 21 to 13. As a result, there are minor changes in the basic custom duties, cesses & surcharges on some items including toys, bicycles, automobiles," FM Nirmala Sitharaman said.
Before the presentation of the Budget 2023, there were several reports regarding the restructuring of the tax system. Standard deduction hike, increase in 80C exemption, and rejigging tax slab rates were some of the expectations of the salaried class from this year's Budget.
Previously, taxpayers could choose between the two regimes to pay their taxes. The new tax regime was announced in Budget 2020. The salaried class was given the option to choose between the old tax regime of exemptions and standard deductions and a new concessional tax system without any deductions.
Income up to Rs 2.5 lakh is exempt from taxation under both regimes. Income between Rs 2.5 lakh to Rs 5 lakh is taxed at the rate of 5 per cent under the old as well as the new tax regime. Personal income from Rs 5 lakh to Rs 7.5 lakh is taxed at a rate of 10 per cent under the new regime.
Before the presentation of Budget 2023 here is what income tax slabs looked like
ANNUAL INCOME EXISTING REGIME NEW REGIME
up to Rs 2,50,000 Nil Nil
2,50,000-5,00,000 5% 5%
5,00,000-7,50,000 20% 10%
7,50,000-10,00,000 20% 15%
10,00,000-12,50,000 30% 20%
12,50,000-15,00,000 30% 25%
Above 15,00,000 30% 30%
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