Union Budget 2023-2024: What are the new income tax slabs and how much tax will you pay?
Finance Minister Nirmala Sitharaman in her Budget 2023 speech announced changes to the tax slabs in the new regime, providing relief to the middle class. She also announced that there would be no tax on an annual income of Rs 7 lakh under this
FP Explainers Last Updated:February 01, 2023 17:41:48 IST
Currently, India is the world’s third-largest silver physical investment market after the US and Germany. The country’s silver imports touched a record high of 8,000 tonnes in 2022 on rise in jewellery consumption, as per market data. AFP
When it comes to the Budget, there’s no bigger or more important point than that of income tax for the aam aadmi and the salaried class of India. After providing no relief to the common man in last year’s Budget, Budget 2023 comes as some respite.
Speaking in Parliament, Finance Minister Nirmala Sitharaman said, “I come to what everyone is waiting for — personal income tax. I have five major announcements to make in this regard. These primarily benefit our hard-working middle class.”
What are these announcements? How has the income tax slabs changed? How is the common man benefitted? Read on to get the answers.
Tax rebate extended
Finance Minister Nirmala Sitharaman has announced an increase in income tax rebate limit from Rs 5 lakh to Rs 7 lakh in the new tax regime. What this means is that anyone earning up to Rs 7 lakh a year won’t have to pay any income tax on it.
However, the finance minister clarified that this won’t apply to those who opt for the old tax regime. For the unaware, in 2020, Sitharaman had introduced a new tax regime for the salaried class, stating that it would be optional and people could continue with the old regime if they wished to do so.
New Income Tax Slabs
Finance Minister Nirmala Sitharaman in her Budget speech announced new tax slabs for the common man in the new tax regime.
In the existing new tax regime, the slabs were as follows:>> Up to Rs 2.5 lakh — NIL tax>> From Rs 2,50,001 to Rs 5,00,000 — 5 per cent>> From Rs 5,00,001 to Rs 7,50,000 — 10 per cent>> From Rs 7,50,001 to Rs 10,00,000 — 15 per cent>> From Rs 10,00,001 to Rs 12,50,000 — 20 per cent>> From Rs 12,50,001 to Rs 15,00,000 — 25 per cent>> Above 15,00,000 — 30 per cent
However, Finance Minister Nirmala Sitharaman has reformed the tax slabs for the new regime. As per her announcement, the new tax slabs are:
Graphic: Pranay Bhardwaj
In her speech, she explained that this would provide major relief to all taxpayers opting for the new regime. She said, “An individual with an annual income of Rs 9 lakh will now be required to pay only Rs 45,000. This is only five per cent of his or her income. It is a reduction of 25 per cent on what he or she is required to pay now, — 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, a reduction of 20 per cent from the existing liability of Rs 1,87,500.”
The idea behind the new tax slabs is to incentivise people to shift to the new tax regime, which has not seen much traction since its launch. As Shalini Jain, tax partner at EY India told Economic Times, “In line with the expectations of making the new tax regime more attractive for individuals, the finance minister has announced new income slabs bringing down the overall tax outgo for the middle-income earner group in Fy2023-2024.Finance Minister Nirmala Sitharaman also stated in her speech that the new tax regime would now become the default option for the salaried class. She, however, added that the old tax regime still remains an option for the common man.
Soon after the announcement, people were trying to understand if the new slabs would prove beneficial to them or not. One economic expert said that on first glance of the Budget, it appeared that people in lower middle-income groups would pay less tax.
Ankit Jain of Ved Jain & Associates was quoted as telling The Economic Times, “The basic tax slabs have been revised, providing some relief to taxpayers, and the highest surcharge rate has been reduced to 25 per cent from 37 per cent, offering substantial relief to ultra HNIs. However, the highest tax rate remains unchanged at 30 per cent for income above Rs 15 lakh, providing those with income between Rs 15 lakh and Rs 2 crore with insignificant benefits.”
Pallav Pradyumn Narang of CNK also told The Economic Times, “The finance minister has provided a shot in the arm for smaller taxpayers by increasing rebates and ensuring that there is no income tax levied up to Rs 7 lakh in income. In addition, the revised tax slabs under the new tax regime and the extension of the standard deduction will ensure that the salaries class will have a little more cash in hand this coming year to fuel consumption and or investments in India.”
However, not all welcomed the move. Congress’ Gaurav Gogoi stated that the income tax rebate announced by the finance minister of up to Rs 7 lakh was “insignificant”. “Considering the inflation and price rise, it’s like a drop in the ocean for middle class,” Gogoi was quoted as saying by ANI.
It is imperative to mention again that changes to the income tax slabs only apply to the new regime and not to those who opt for the old regime.
With inputs from agencies