New Delhi: Union Finance Minister Nirmala Sitaraman on February 1 brought smiles on faces of middle class. Reason for smiles are five major budget announcements with respect to personal income tax.
Some of these announcements pertain to rebate and change in tax structure, as also to the extension of benefit of standard deduction to the new tax regime. Moreover, there is reduction in highest surcharge rate and extension of limit of tax exemption on leave encashment on retirement of non-government salaried employees. “These proposals will provide substantial benefits to the working middle class,” the FM said while presenting 2023-24 Union Budget in the Parliament here.
In new regime, people with income up to Rs 7 lakh will not have to pay any tax, Sitharaman said. “Currently, those with income up to Rs 5 lakh do not pay any income tax in both old and new tax regimes,” she said.
Providing relief to middle class individuals, Sitharaman proposed a change in the tax structure. The FM has reduced the number of slabs to five in the new personal income tax regime. At the same time, the tax exemption limit has been raised to Rs 3 lakh.
The new tax rates are: Upto 0-3 lakh (nil), from 3-6 lakh (5 percent), from 6-9 lakh (10 percent), from 9-13 lakh (15 percent), from 12-15 lakh (20 percent) and above 15 lakh (30 percent).
|0 – 3 Lakhs||Nil|
|3 – 6 Lakhs||5%|
|6 – 9 Lakhs||10%|
|9 – 12 Lakhs||15%|
|12 – 15 Lakhs||20%|
|Above 15 Lakhs||30%|
Less income tax, more savings
The new tax rates will provide major relief to all tax payers in the new regime, she said. “An individual with an annual income of Rs 9 lakh will be required to pay only Rs 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 presently, i.e. Rs. 60,000,”
“Similarly, an individual with an income of Rs 15 lakh would be required to pay only Rs 1.5 lakh or 10 per cent of his or her income. This is a reduction of 20 per cent from the existing liability of Rs 1,87,500,” she added.
The third proposal of the budget provides major relief to the salaried class and the pensioners. This includes the family pensioners as she proposed to extend the benefit of standard deduction to the new tax regime. Each salaried person with an income of Rs 15.5 lakh or more will thus stand to benefit by Rs 52,500, Sitharaman said.
The old regime offers a standard deduction of Rs 50,000 to salaried individuals. Moreover, it offers a deduction from family pension up to Rs 15,000, she said.
Highest surcharge rate slashed
As part of her fourth announcement with respect to personal income tax, Sitharaman proposed to reduce the highest surcharge rate from 37 percent to 25 percent in the new tax regime for income above Rs 2 crore.”This would result in reduction of the maximum tax rate to 39 percent from the present 42.74 percent, which was among the highest in the world,” she said. However, no change in surcharge is proposed for those who opt to be under the old regime in this income group.
As per her fifth announcement, the budget proposed extension of limit of tax exemption on leave encashment to Rs 25 lakh on retirement of non-government salaried employees in line with the government salaried class. At present, the maximum amount which can be exempted is Rs 3 lakh.
The budget proposed to make the new income tax regime as the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime, the finance minister said.