Union Budget 2023: Major Boost to New Tax Regime; Tax Slabs Tweaked In a major boost to the New Tax Regime, the Finance Minister Nirmala Sitharaman, in Union budget 2023, announced 5 major announcements related to the personal income tax, but all under the new regime structure.

By Priya Kapoor

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Freepik

The Finance Minister Nirmala Sitharaman, in Union budget 2023, gave the new tax regime a major push by announcing 5 key announcements related to the personal income tax.

1. Reduction in tax slabs: In the budget, FM Sitharaman reduced the number of tax slabs in the new tax regime to just five from the existing six, with the lowest rate being 5 percent and highest 30 percent. Along with this, the tax exemption limit was also increased to INR 3 lakh from existing INR 2.5 lakh.

Slabs (Rs)Revised tax rates
Upto 3 lakhNIL
3- 6 lakhs5%
6-9 lakhs10%
9-12 lakhs15%
12- 15 lakhs20%
15 lakhs and above30%

2. Standard deduction for salaried and pensioners. While the salaried class was availing the benefit of standard deduction in the old tax regime, it has now been extended to salaried and pensioners opting for the new tax regime too. With this, each salaried person with an income of INR15.5 lakh or more stands to benefit by INR 52,500.

3.Increase in rebate limit. In the budget, the government also increased the rebate limit under Section 87A ( which was previously capped at Rs 12,500). This along with the change in the tax slabs have made taxpayers happy as they will not be required to pay any tax with an income upto to INR 7 lakh. "Currently, those with income up to INR 5 lakh do not pay any income tax in both old and new tax regimes. I propose to increase the rebate limit to INR 7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to INR 7 lakh will not have to pay any tax," said Sitharaman while presenting Budget 2023 in parliament today.

4. Reduction in surcharge. The imposition of 37 per cent surcharge (the highest) over and above the tax rate, takes the maximum tax rate to 42.74 percent. The Union budget 2023 capped the highest surcharge to 25 percent, thereby limiting the maximum tax rate to 39 percent.

5. Increase in tax exemption on leave encashment. Non-government salaried employees who want to avail leave encashment on retirement can now take exemption up to Rs 25 lakh as regards to the earlier limit of INR 3 lakh. According to the government, the move was necessary as the limit was set when the highest basic pay in the government was mere INR 30,000.

The finance minister said that the government is making the new tax regime as the default one, though the citizens will continue to have the option to avail benefit of old tax regime. "With lower taxes and zero tax at INR 7 lakhs, disposal income will rise easing out inflation pressure on the middle class. This is a big relief to them. But it is clear the government is working towards making the new tax regime more attractive with perhaps the intention of phasing out of the old regime," says Archit Gupta, Founder and CEO, Clear.

New tax regime

The new income tax regime or the alternate concessional tax regime was introduced two years ago with six income tax slabs starting from INR 2.5 lakh. While it co-existed with the old tax regime, it couldn't find many takers as it lacked many exemptions available under the old tax regime (house rent, LTA and various investments under Section 80C, 80D etc). Other reasons included restricting many from switching back to old tax regimes. These were particularly for people with business incomes or earning incomes from freelancing.

Wavy Line
Priya Kapoor

Feature Editor

Priya holds more than a decade of experience in journalism. She has worked on various beats and was chosen as a Road Safety Fellow in 2018, wherein she produced many in-depth & insightful features on road crashes in India. She writes on startups, personal finance and Web3. Outside of work, she likes gardening, driving and reading. She can be reached at her email id: kpriya@entrepreneurindia.com

 

 

 

Related Topics

News and Trends

KL Rahul Invests In Sequoia-Backed Hyugalife.com

KL Rahul, who is currently recovering from a sports injury has joined hands with HyugaLife.com to inspire every Indian to be their healthiest and best self with its all-encompassing platform

Money & Finance

3 Ways to Create Multiple (Big) Streams of Income

Here are three ways to create multiple streams of income. These strategies require effort and resources but offer significant financial potential.

Business News

'All Hell Is Going to Break Loose': Barbara Corcoran Issues Warning About Real Estate Market, Interest Rates

The "Shark Tank" star appeared on FOX Business' "The Clayman Countdown" this week.

News and Trends

B2B Fintech platform BharatNXT Raises $1.2 Million Seed Fund

The funds will be utilized to invest in product development and expanding the team size by 4 times and enhancing the scalability of the core technology to accommodate ten times the current growth

Science & Technology

She's Been Coding Since Age 7 and Presented Her Life-Saving App to Tim Cook Last Year. Now 17, She's on Track to Solve Even Bigger Problems.

Angelina Tsuboi, a full-stack mobile and web developer who also happens to be a pilot, has always been solution-oriented.

Entrepreneurs

This Unique Social Startup Helps in Offsetting Carbon Footprint

Verdoo, a free online tool, helps consumers fight climate change through online shopping