During the Union Budget speech in the House, Union Finance Minister Nirmala Sitharaman on Wednesday announced change in income tax slabs, up to ₹7 lakh rebate under new income tax regime.
“The rebate under section 87A of new income regime hiked to ₹7 lakh,” said Finance Minister while presenting Budget 2023.
“The new tax regime has got a great boost by the Budget announcements made by the FM. Taxpayers at both ends of the spectrum will be encouraged under the new regime, as there will be no liability upto annual income of 7 lacs on 1 hand & surcharge on annual income above 5 crores has been reduced from 37 to 25% at the high income end,” said Alok Agrawal, Partner, Deloitte India.
Here are the 5 income tax rule changes announced by FM Sitharaman in Budget 2023
1) Tax rebate limit raised to ₹7 lakh from ₹5 lakh
“The refund has been enhanced to ₹7 lakh under the new tax scheme. The new information technology system will act as the default tax regime. Tax assessors will still be able to choose from the prior regime. Salaried and pensioners: the new system’s standard deduction for taxable income exceeding Rs.15.5 lakhs is Rs.52,500. The new system will decrease the six income categories to five: basic exemption up to three lacs, 3-6 lakh 5%, 6-9 lakh 10%, and 9-12 lakh 15%. 12-15 lakhs is 20%, whereas 15 lakhs or over is 30%,” said Amit Gupta, MD, SAG Infotech
2) Changes in Income Tax Slab
0-3 lakh – nil
3-6 lakh – 5%
6-9 lakh- 10%
9-12 lakh – 15%
12-15 lakh – 20%
above 15 lakh- 30%
3) New Income Tax regime to be default regime.
“The government is actively promoting the new tax regime, which will now be the default tax regime. The basic exemption under this regime has increased to 3 lakhs from 2.5 lakhs. Individual tax payers earning up to ₹7 lakhs will not have to pay taxes as compared to current limit of ₹5 lakhs. Tax rates have been reduced under the new tax regime and the maximum marginal rate drops from 42.74% to 39%,” said Saraswathi Kasturirangan, Partner, Deloitte India
4) An Individual with an annual income of 9 lakhs will be required to pay only 45,000.
5) Maximum tax, along with surcharge, will be 39%. The Current tax rate in country is 42.74%, among the highest in world. Budget23 proposes to reduce the highest surcharge rate from 37% to 25% in the new Tax regime. This will result in the reduction of the maximum tax rate to 39%.
Finance Minister also announced that the average processing time for income tax returns reduced from 93 days to 16 days.
The income tax slabs were not changed since 2014. The basic personal tax exemption limit was last revised in 2014.