In Budget 2023, Finance Minister Nirmala Sitharaman announced that the relief in personal income tax is expected to raise disposable income and transition taxpayers to the new tax regime. The government 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.
As per the revision, an individual with an annual income up to Rs 3 lakh will not have to pay any tax (against an earlier limit of Rs 2.5 lakh). Further, it has proposed a 5 percent tax for income between Rs 3–6 lakh, 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.
The highest surcharge rate has been reduced to 25 percent from 37 percent in the new slab. The old tax regime will continue to be there and new regime will be a default one. Individuals will 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.
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A tax of 5 percent would be levied on total income between Rs 3 lakh and Rs 6 lakh, 10 per cent tax would be imposed on income between Rs 6 lakh to Rs 9 lakh, it would be 15 per cent on income between the range of Rs 9 lakh to Rs 12 lakh. On the income range of Rs 12 lakh to Rs 15 lakh, 20 per cent tax would be levied, while tax would be 30 per cent on income slab of Rs 15 lakh and above, the finance minister informed.