Today on 1st February 2023 a new year Union Budget was presented by the honorable Finance Minister of India Nirmala Sitharaman, which has grabbed the whole attention towards the news. And in this article, I will tell you all about the news and the old regime of the tax lab, and information about so many changes.
Before detailing I must tell you one of the top news is that now it has been increased the rebate limit for individual taxpayers from ₹ 5 lahks to ₹ 7 lahks a year.
Ms. Sitharaman, while presenting Budget 2023 in parliament today, proposed to increase the rebate limit to ₹ 7 lakh in the new tax regime.
This means that individuals with an income of up to ₹ 7 lakh under the new tax regime will not be required to pay any income tax, compared to the current limit of ₹ 5 lakh in both old and new tax regimes.
See the New Tax Slab:
"Ms Sitharaman announced a change to the personal income tax regime introduced in 2020, reducing the number of slabs from six to five and increasing the tax exemption limit to ₹ 3 lakh. The regime originally had six income slabs starting at ₹ 2.5 lakh."
In the 2020 Budget, the Finance Minister offered individual taxpayers a choice between the old tax rate, which allowed for exemptions, or the reduced new rate without the option for exemptions.
Under the previous tax regime, individuals earning ₹ 15 lakh per year were taxed at 30%, with the option to claim exemptions.
Individuals who chose the new regime introduced in 2020 and had an income above ₹ 15 lakh were taxed at 25% without the ability to claim exemptions.
Below is an example of how the new tax regime leads to more savings:
If your annual salary is ₹ 7 lakh, you are exempt from paying any tax. This is an increase from the previous rebate limit of ₹ 5 lakh.
If your salary is ₹ 9 lakh per year, it will be taxed based on the established slab system. This means that the amount will be divided into specific brackets for tax purposes."
A. 0-₹ 3 lakh: Tax exempt (previously 0-₹ 2.5 lakh was exempt)
Balance: ₹ 6 lakh will be taxed in two brackets, with the ₹ 3-6 lakh portion taxed at 5% and the ₹ 6-9 lakh portion taxed at 10%
B. 5% tax on ₹ 3 lakh: ₹ 15,000
Balance: ₹ 3 lakh will be taxed in one bracket, i.e. the ₹ 6-9 lakh portion at 10%
C. 10% tax on ₹ 3 lakh: ₹ 30,000
Total tax on ₹ 9 lakh (sum of A, B, and C): ₹ 45,000
However, if the ₹ 9 lakh was taxed using the previous slabs (0-₹ 2.5 lakh exempt and ₹ 5 lakh rebate), you would have to pay a minimum of ₹ 60,000, resulting in a 25% savings with the new slabs.