The government has introduced a slew of changes to the 'new income tax slab' in order to reduce the tax liabilities for middle class individuals. As part of its Budget 2023 announcement, Finance Minister Nirmala Sitharaman said that the tax rebate has been extended on income up to Rs 7 lakh in new tax regime as per Section 87A, as against Rs 5 lakh. The highest surcharge rate has been reduced to 25 percent from 37 percent in the new slab, FM said.
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Also, the new tax regime will become a default one, she added.
As per the revision, an individual with an annual income up to Rs 3 lakh will not have to pay any tax (as against an earlier limit of Rs 2.5 lakh). Further, it has proposed a 5 percent tax for income between Rs 3 – 6 kah, 10 percent for income between Rs 6-9 lakh, 15 percent for income between Rs 9-12 lakh, 20 percent for income between Rs 12 – 15 lakh and 30 percent above Rs 15 lakh.
| Income tax slab (Proposed) | Tax Rate |
| Up to Rs 3 lakh | Nil |
| Rs 3 lakh-Rs 6 lakh | 5% |
| Rs 6 lakh- Rs 9 lakh | 10% |
| Rs 9 lakh- Rs 12 lakh | 15% |
| Rs 12 lakh- Rs 15 lakh | 20% |
| Above Rs 15 lakh | 30% |
Hailing the changes, Sandeep Agrawal Director & Co-founder at Teamlease Regtech said that this will result in around 25 percent reduction in tax liability for individuals with income up to Rs 9 lakh and around 20 percent reduction in tax liability for individuals with income up to Rs 15 lakh.
Suman Chowdhury, Executive Director & Chief Analytical Officer at Acuité Ratings & Research said that the rationalization of the personal income tax structure is expected to lead to two things - raise disposable incomes for the middle class and particularly younger taxpayers and transition the taxpayers to the new tax regime with minimal exemptions and lower and simpler tax slabs.
"This is expected to give a moderate boost to domestic consumption," Chowdhury said.
ALSO READ | Budget 2023: FM launches new small savings scheme 'Mahila Samman Bachat Patra' with 7.5% return
Earlier in February 2020, government introduced ‘New Tax Regime'.
.@SurabhiUpadhyay & @sonalbhutra present a quick breakdown of the changes introduced in personal income tax in Budget 2023 https://t.co/fk3H1bcze7
— CNBC-TV18 (@CNBCTV18News) February 1, 2023
It must be noted that the old tax regime will continue to be there and new regime will be a default one. Individuals will still have the choice of paying tax under the new slab with lower rates but foregoing deductions or continue paying tax under the old tax laws and claiming the applicable exemptions.
First Published: Feb 1, 2023 12:31 PM IST
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