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Budget 2023: How the new tax regime is different from the existing one
Budget 2023: Finance minister Nirmala Sitharaman announced that the taxpayers with income up to ₹7 lakh now do not need to pay any income tax under both the old and new tax regimes. Earlier, the previous income tax rebate limit was ₹5 lakh.
It is the big income tax bonanza by the Narendra Modi government in the Union Budget presented by finance minister Nirmala Sitharaman today in Parliament. The finance minister during her 87-minute speech in the government's last full budget before the 2024 Lok Sabha polls announced five tax-related measures.
The minister announced that the taxpayers with income up to ₹7 lakh now do not need to pay any income tax under both the old and new tax regimes. Earlier, the previous income tax rebate limit was ₹5 lakh.
The finance minister also increased the tax exemption limit from ₹2.5 lakh to ₹3 lakh. Let us take a look at both the existing and new tax slab.
In 2020, the finance minister had reduced the income tax rate for individual tax payers and had also introduced new slabs for taxation purposes. During her 160-minute budget speech that year, Sitharaman had said that people earning till ₹5 lakh need not have to pay any income tax. Those individuals with income between ₹5 lakh and ₹7 lakh had to pay 10 per cent tax.
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The tax payers earning between ₹7.5 lakh and ₹10 lakh had to pay 15 per cent income tax. The taxpayers whose income was between ₹10 lakh and ₹12.5 lakh were paying income tax of 20 per cent. Those taxpayers with income between 12.5 lakh and 15 lakh, the revised tax rate will be 25 per cent.
The finance minister has now reduced the number of tax slabs from six to five and increased the exemption limit to ₹5 lakh. As stated above in the table, there is zero tax on income till ₹3 lakh.
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Those earning between ₹3 lakh and ₹6 lakh will have to pay 5 per cent of the tax, while 10 per cent tax will be levied on income between ₹6 lakh and ₹9 lakh. The individuals with income between ₹9 lakh and ₹12 lakh will pay 15 per cent tax while those with income between ₹12 lakh and ₹15 lakh will pay 20 per cent tax. The tax on income above ₹15 lakh is 25 per cent.
The minister said, “An individual with an annual income of ₹9 lakh will be required to pay only ₹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, ₹60,000/-. Similarly, an individual with an income of Rs15 lakh would be required to pay only ₹1.5 lakh or 10 per cent of his or her income, a reduction of 20 per cent from the existing liability of ₹1,87,500”.
“This is a Budget that’s truly designed for India’s aam aadmi, one that promotes growth and consumption. Enhancement of income tax rebate limit from INR 5 lakh to INR 7 lakh will give a great boost to the country’s middle class, including the rapidly growing gig economy. Extending benefits of standard deduction under the new tax regime is a move that will give huge respite to salaried individuals”, Yogesh Agarwal, Founder and CEO, Onsurity Technologies, said.
