New Delhi: As Union Finance Minister Nirmala Sitharaman on Wednesday (February 1, 2023) announced that no tax would be levied on annual income of up to Rs 7 lakh under the new tax regime, her cabinet colleague Rajnath Singh praised the decision and said that it will be “huge relief to the middle class”. While presenting the Budget for 2023-24 in Parliament, Sitharaman said currently individuals with a total income of up to Rs 5 lakh do not pay any tax due to rebates under both the old and new regimes.
“It is proposed to increase the rebate for the resident individual under the new regime so that they do not pay tax if their total income is up to Rs 7 lakh,” Sitharaman said.
She further said that under the new personal income tax regime, the number of slabs would be reduced to five,
“I propose to change the tax structure in this regime by reducing the number of slabs to five and increasing the tax exemption limit to Rs 3 lakh,” Sitharaman said.
Reacting to the development, Singh said that the increase in Income Tax exemption limit to Rs 7 lakh and several other tax related reforms will provide a huge relief to middle class including salaried individuals and retired people.
“I congratulate the FM and thank Prime Minister (Narendra Modi) ji for taking this people-friendly decision,” he said in a tweet.
The increase in Income Tax exemption limit to Rs 7 lakhs and several other tax related reforms will provide a huge relief to middle class including salaried individuals and retired people. I congratulate the FM and thank the Prime Minister for taking this people friendly decision. — Rajnath Singh (@rajnathsingh) February 1, 2023
“The Budget demonstrates the government’s commitment towards supporting growth and welfare-oriented policies that will benefit all sections of society including small businesses owners, farmers, and professionals alike,” the senior Bhartiya Janata Party (BJP) leader added.
New Income Tax Slabs 2023-24: No Income Tax Till Rs 7 lakh
Under the revamped concessional tax regime, no tax would be levied for income up to Rs 3 lakh,
Income between Rs 3-6 lakh would be taxed at 5%; Rs 6-9 lakh at 10%, Rs 9-12 lakh at 15%, Rs 12-15 lakh at 20%, and income of Rs 15 lakh and above will be taxed at 30%.
“I propose to extend the benefit of standard deduction to the new tax regime. Each salaried person with an income of Rs 15.5 lakh or more will thus stand to benefit by Rs 52,500,” FM Sitharaman said.
#WATCH , Union Finance Minister Nirmala Sitharaman announces new personal Income Tax slabs. #UnionBudget2023
(Video: Sansad TV) pic.twitter.com/sxSQ4uzMWZ— ANI (@ANI) February 1, 2023
The government in Budget 2020-21 had brought in an optional income tax regime, under which individuals and Hindu Undivided Families (HUFs) were to be taxed at lower rates if they did not avail of specified exemptions and deductions, like house rent allowance (HRA ), interest on a home loan, investments made under Section 80C, 80D, and 80CCD. Under this, total income up to Rs 2.5 lakh was tax-exempt.
Currently, a 5 per cent tax is levied on total income between Rs 2.5 lakh and Rs 5 lakh, 10 per cent on Rs 5 lakh to Rs 7.5 lakh, 15 per cent on Rs 7.5 lakh to Rs 10 lakh, 20 per cent on Rs 10 lakh to Rs 12.5 lakh, 25 percent on Rs 12.5 lakh to Rs 15 lakh, and 30 percent on above Rs 15 lakh.
The scheme, however, has not gained traction as in several cases it resulted in higher tax burden.
With effect from April 1, these slabs will be modified as per the Budget announcement.