Taxpayers With Income Marginally Over Rs 7 Lakh To Get Relief In New Tax Regime

Now, individuals earning a little higher income than the no-tax ceiling of Rs 7 lakh will pay tax only on the differential income.

The Central government on Friday announced marginal relief for taxpayers opting for the new tax regime. Now, individuals earning a little higher than the no-tax ceiling of Rs 7 lakh will pay tax only on the differential income. The government introduced this amendment in the Finance Bill 2023, which was passed by the Lok Sabha on Friday. 

Explaining the provision, the Finance Ministry said under the new tax regime, with effect from April 1, if a taxpayer has an annual income of Rs 7 lakh they pay no tax. However, if the taxpayer has an income of Rs 7,00,100, the tax is 25,010. Thus an additional income of Rs 100 leads to a tax of Rs 25,010.

Now, after the amendment, the tax what one pays should not be more than the income that exceeds Rs 7 lakh (Rs 100 in this case), the ministry said.

In the Budget 2023, Finance Minister Nirmala Sitharaman announced that no tax would be levied on those with an annual income of up to Rs 7 lakh under the new tax regime. The move, in the opinion of experts, was intended to compel the salaried class of taxpayers to migrate to a new tax system without investment exemptions.

As per the announcement in Budget 2023, under the new tax regime, no tax is levied for income up to Rs 3 lakh. Income between Rs 3-6 lakh is taxed at 5 per cent; Rs 6-9 lakh at 10 per cent, Rs 9-12 lakh at 15 per cent, Rs 12-15 lakh at 20 per cent, and income of Rs 15 lakh and above will be taxed at 30 per cent. Further, a Rs 50,000 standard deduction was allowed under the new regime.

Now the government has brought in amendments to the Finance Bill 2023, which has given 'marginal relief' to those taxpayers with an annual income of a little over Rs 7 lakh.

A PTI report says that Tax experts believe individual taxpayers with income of Rs 7,27,777 would benefit from this relief. However, the government has not indicated the income threshold that would be eligible for marginal relief.

Nangia Andersen LLP Partner Sandeep Jhunjhunwala told PTI that the amendment to Finance Bill seeks to provide a marginal relief to individual taxpayers having borderline income by proposing a deduction of income tax payable in excess of the differential income above Rs 7 Lakh.

"Working out the math, an individual having income up to (approx.) INR 7,27,700 could stand to benefit from this marginal relief," Jhunjhunwala said.