Finance Minister Nirmala Sitharaman made five major announcements on personal income tax to benefit the “hard-working” middle class. She also said that while the new tax regime would be the default, tax payers could opt for the old one.
Sitharaman proposed to raise the rebate limit from Rs 5 lakh to Rs 7 lakh in the new tax regime. Therefore, if an individual has opted for the new tax regime, he or she will not be required to pay any tax up to an annual income of Rs 7 lakh.
She also announced changes to tax slabs in the new tax regime.
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The new income tax slabs under the new tax regime are
Rs 0-3 lakh: Nil
Rs 3-6 lakh: 5 per cent
Rs 6-9 lakh: 10 per cent
Rs 9-12 lakh: 15 per cent
Rs 12-15 lakh: 20 per cent
Over Rs 15 lakh: 30 per cent
The move is aimed at incentivising people to shift to the new tax regime, which has not seen much traction since launch in FY21.
What is the new tax regime?
The lower tax regime for individuals was introduced in 2020 under Section 115BAC as a simpler alternative, without claiming any investment-related deductions or exemptions. This was expected to prove useful for individuals who were not in a position to invest and claim deductions. The new regime had more slabs than the previous one.
However, this regime has not seen many takers so far, as it is considered more complicated.
Earlier in January, Sitharaman had responded to a claim in the book Reform Nation, authored by Observer Research Foundation Vice President Gautam Chikermane, that the new and voluntary income tax regime had removed the simplicity of the old one, which had just three tax slabs of 10 per cent, 20 per cent, and 30 per cent.
“If indeed there were gains of simplicity (from the old income tax regime), I want to assure they have not been reversed,” Sitharaman had said in New Delhi. “People have been filing returns under it. Gains of simplicity are still there.”
She said the old tax regime was full of exemptions.
“For every tax assessee, it has 7, 8, 9, 10 exemptions. And with all that exemptions, the rate 10, 20, 30 per cent continues. It continues even today. We have not removed it. What we have done in the name of simplicity and to avoid harassment… removing harassment was what was aimed at when we brought in faceless tax assessment,” she said.
The various tax slabs.
“In order to keep the simplicity and not deny those who want to keep the old simplicity, we kept that intact but we have come up with a parallel system which has no exemptions whatsoever, but which has simpler, more favourable rates… The reason why I had to bring in seven slabs was to make simpler and lower rates for those who are in the lower incomes,” she said.
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And who is eligible for rebates under the old tax regime?
Under this regime, people can cite investments, house rent, LTA, exemptions under Section 80C, etc. to reduce the amount of tax they have to pay. However, some experts believe this means a higher burden of compliance on taxpayers.
Union Budget 2023: All you need to know
Also ReadChina’s ex-Foreign Minister Qin Gang removed over extramarital affair: Wh…Special session of Parliament: What Bills are likely to be introduced?What is the Vishwakarma scheme, launched for those engaged in traditional…A look at women representation in parliaments of 10 democracies↗️ Finance Minister Nirmala Sitharaman’s Union Budget 2023 has some big takeaways↗️ First, what everyone has been looking forward to: changes in the new income tax regime. She has made the new tax regime more attractive. There are changes in the rebate limit and in tax slabs. What does this mean for the taxpayer?↗️ FM Sitharaman proposed a 33% increase in capital investment outlay, raising it to Rs 10 lakh crore. This is the biggest in the past decade. What does it mean?↗️ Some articles get cheaper and others get costlier due to changes in customs duty. Here is a list↗️ The capital outlay for the railways has been increased to the highest ever – Rs 2.40 lakh crore. The government is trying to create more jobs↗️ FM Sitharaman said the fiscal deficit will fall to 5.9% of the GDP. What does it mean for the stakeholders?↗️ The FM called it the ‘first Budget of Amrit Kaal’. PM Narendra Modi said it will build a strong foundation for a developed India. What did opposition leaders say?