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Union Budget 2023 for Tax Payers
Updated on : None - None 17 min read.
The recent Union Budget of 2023 has announced several significant changes related to the personal income tax. These announcements are primarily aimed at benefiting the middle-class tax payers of the Country.
The first change is the increase in the rebate limit. Previously, those with an income of up to INR 5 lakh were not required to pay any tax in either the old or new tax regimes. However, the budget has proposed an increase in the rebate limit to INR 7 lakh, meaning that individuals with an income of up to INR 7 lakh will not have to pay any tax in the new tax regime.
The second proposal concerns changes to the personal income tax structure in the new tax regime. The number of slabs has been reduced from six to five, with the tax exemption limit increased to INR 3 lakh. The new tax rates are as follows:
- 0-3 lakh: Nil
- 3-6 lakh: 5%
- 6-9 lakh: 10%
- 9-12 lakh: 15%
- 12-15 lakh: 20%
- Above 15 lakh: 30%
This change will provide major relief to individuals in the new tax regime. For instance, an individual with an annual income of INR 9 lakh will now be required to pay INR 45,000, which is only 5% of their income, a reduction of 25% from their current liability of INR 60,000. Similarly, an individual with an income of 15 lahks would be required to pay only 1.5 lahks or 10 percent of his or her income, a reduction of 20 percent from the existing liability of 1,87,500/.
The third proposal is for the salaried class and pensioners, including family pensioners, who will now be able to benefit from the standard deduction in the new tax regime. This will result in a benefit of INR 52,500 for each salaried person with an income of INR 15.5 lakh or more.
The fourth announcement is a reduction in the highest surcharge rate from 37% to 25% in the new tax regime. This will result in a reduction in the maximum tax rate from 42.74% to 39%.
Finally, the limit for tax exemption on leave encashment on the retirement of non-government salaried employees has been increased from INR 3 lakh to INR 25 lakh. This change was made in line with the increase in government salaries since the limit was last fixed in 2002.
The new tax regime will now be the default tax regime, with citizens still having the option to opt for the old tax regime. The budget has also proposed several other changes, as listed in the annexure.
As a result of these proposals, the government will be foregoing a revenue of INR 35,000 crore annually, with INR 37,000 crore being forgone in direct taxes and INR 1,000 crore in indirect taxes, while an additional INR 3,000 crore will be mobilized.
In conclusion, the recent budget has made several significant changes to the personal income tax, which will provide relief to the middle-class tax payers. The new tax regime will now be the default option, with individuals still having the option to opt for the old regime.
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