- Date : 01/02/2023
- Read: 3 mins
Coverage of all the direct tax changes introduced in the union budget 2023
In what can be seen as a slight nudge to direct the taxpayer, Ms Nirmala Sitharaman has said that the new tax regime is the default regime. The old regime, however, continues to be available for the taxpayers. This is one of the many declarations made by the Finance Minister as she presented the Union Budget for 2023-24 in the parliament today.
Income Tax Rebate
Presently, if you are earning a total annual income of less than Rs 5 lakhs you are not liable to pay any income tax. The Finance Minister declared in the budget presentation that this limit will be raised to Rs 7 lakhs in the new tax regime. The Rs 5 lakh limit will continue for taxpayers opting for the old regime.
So, if you have an income of less than Rs 7 lakhs, and you opt for the new regime, you don’t need to invest in saving taxes. Besides, you obviously don’t need to pay taxes as well. For the nation, this means that people will have more disposable income by not investing or only partially investing in tax-saving assets.
Income Tax Slab
Presently, the income tax rate for up to Rs 2.5 lakhs was nil under both the new and old regimes. Today’s budget has increased this amount by a further Rs 50,000 to Rs 3 lakhs, under the new regime. Besides, changes were made in the tax rates and the number of tax rates to five in the new regime. The new income tax slabs for both the regimes for financial 2023-24 look like this,
There is a clear encouragement for taxpayers to opt for the new regime in today’s budget. The FM said that the new regime seeks to simplify tax compliance and make it less cumbersome. Besides, direct taxes also saw other announcements.
The benefits of standard deduction under the new tax regime are being proposed to be extended to the salaried class and pensioners, including family pensioners. A salaried individual with an income of Rs 15.5 lakh or more will gain benefits of Rs 52,500.
Maximum Tax Rate
The Finance Minister mentioned that the maximum tax rate in India is 42.75% which is one of the highest in the world. The FM proposed to reduce the highest surcharge rate from 37% to 25% in the new tax regime. Consequently, the new maximum tax rate will be 39%.
The FM raised the tax exemption limit on leave encashment on the retirement of non-government salaried employees to Rs 25 lakhs. The limit has been left untouched at Rs 3 lakhs since 2002.
With these proposals, the government is foregoing direct tax revenue opportunities of Rs 37,000 crores while mobilising new revenue opportunities of Rs 3,000 crores. Combined with the Rs 1,000 crore foregone in indirect taxes, the total tax revenue foregone is Rs 37,000 crores.