New Delhi: Bringing a big relief for the salaried class people in the Union Budget 2023, Finance Minister Nirmala Sitharaman extended the tax rebate limit from Rs 5 lakh to Rs 7 crore in the new tax regime.
Revising the tax exemption limit from Rs 2.5 lakh to Rs 3 lakh, the Finance Minister said that five major changes have been brought in the direct taxes or Individual Income taxes.
The Finance Minister said that these proposals will benefit the ‘hard-working middle class’.
Going forward, the new Income Tax regime will become the by-default tax regime, however, citizens will have flexibility to avail the benefits under old tax regime also, if they opt for it.
5 major announcements/proposals in Income Tax
1) The first proposal in the Individual Income tax is raising the income tax rebate limit to Rs 7 lakh. Currently, those with income upto Rs 5 lakh don’t need to pay any taxes, under both the old & new regimes. However, from next financial year, the taxpayers filing ITR under the new regime will not be paying any income tax on income upto Rs 7 lakh.
2) In 2020, the new tax regime was brought by Sitharaman and that had 6 income tax slabs, starting with exemption limit of Rs 2.5 lakh. This year, she cut down 1 slab to 5 tax slabs & raised the exemption limit to Rs 3 lakh.
3) Standard deduction benefit, an important feature of old tax regime, has been proposed in the new tax regime for first time. Salaried class & pensioners can avail benefit of this deduction.
“Each salaried person with an income of ₹15.5 lakh or more will thus stand to benefit by ₹52,500,” FM said.
4) Another big change in the income tax is reducing the ‘burden’ of high net worth individuals. The Finance Minister proposed reducing the surcharge rate from 37% to 25% in the new tax regime. She said that this change would bring down maximum tax rate from 43% to 39%
5) Tax exemption on leave encashment for non-government employees (availed on retirement) is another big proposed change in this year’s Budget. Earlier, this limit was fixed at Rs 3 lakh (2002) but now bringing it in sync with ‘changing times’, the Finance Minister proposed to increase it to Rs 25 lakh.
