Budget 2023: New tax regime to be default; who will benefit from it?
Presenting Budget 2023, Finance minister Sitharaman said that these changes are made to acknowledge the hard work of middle income group tax payers. Modifications in Income tax announced in the Modi government's budget are also seen as measures to promote new tax regime.
Union Finance Minister Nirmala Sitharaman announced that the new tax regime will become the default tax regime, while the old will remain an option. Tabling the budget in parliament on Wednesday, Sitharaman also revised the income tax rebate limit under the new tax regime from ₹5 lakh to ₹7 lakh.
How the tax structure in new tax regime varies from old tax regime?
| New tax regime (now default) | Old tax regime |
|---|---|
| ₹0-3 lakh - Nil | ₹0-2.5 lakh - Nil |
| ₹3-6 lakh - 5% | ₹2.5-5 lakh - 5% |
| ₹6-9 lakh - 10% | ₹5-10 lakh - 20% |
| ₹9-12 lakh - 15% | ₹10 lakh -30% |
| ₹12-15 lakh - 20% | |
| Income up to ₹7 lakh entitled for a rebate | Income up to ₹5 lakh entitled for a rebate |
Who will benefit and who will suffer from the revisions?
Presenting the budget, FM Sitharaman said that these changes are made to acknowledge the hard work of middle incom e group tax payers. Modifications announced in Budget 2023 regarding are also seen as measures to promote new tax regime.
Hindustan Times asked experts about their analysis on the budget announcements.
"This is a win win for everyone," says Deepashree Shetty, Associate Partner- Tax and Regulatory Services, BDO India. He sees the proposals bringing significant change in the payroll procedures of employers for salaried taxpayers.
ALSO READ: Click here for full updates on change in Income tax
“The new Income Tax slabs are a good reflection of fundamental strengthening of the economy," he adds. He believes that the changes will result in consistent increases in indirect taxes, improved tax inclusion and compliance, and a focus on growth by providing consumers with more money to support both spending and saving.
ALSO READ: Budget 2023 new income tax slabs: How to calculate your tax
Anand K Rathi, Co-founder, MIRA Money says, "Happy that the Government didn’t give in to the pressure from the middle class". However, he demands a clear rollout plan toward a simpler, more effective, and inclusive income tax regime.
Rathi claims that the government is seeking to render Section 80C of the Income Tax obsolete with the new tax system, but a phased rolldown would b e more advantageous. He continues by saying that many investors push themselves to make ELSS and Term savings, therefore their abolition could result in lower individual savings.
“Modification to the income tax slabs is a delight for the citizens and should encourage more citizens to declare their income statement,” says Vikas Jain of PLAY Design Labs.
