Confused well-nigh the changes in income tax rules spoken in the latest upkeep introduced in Parliament on 1st February, 2023? We’re breaking it lanugo for you.
If you’re still a little at sea well-nigh the changes in income tax rules spoken by the Finance Minister recently, here’s everything you need to know at a glance. The six income tax rule changes spoken by FM Sitharaman in Upkeep 2023 are summarised as follows:
Increase in tax rebate limit to ₹7 lakh from ₹5 lakh
This ways that individuals with an income less than ₹7 lakh will not have to invest anything to requirement exemptions and their unshortened income will be tax-free, regardless of the value invested. This will requite increasingly spending power to the middle-class as they can now use their unshortened income without worrying well-nigh investment schemes to get exemptions.
New income tax slabs
FM Sitharaman spoken changes in the income tax slabs, reducing the number of slabs to five and increasing the tax exemption limit to ₹3 lakh. The new tax rates are:
- ₹0-3 lakh – Nil
- ₹3-6 lakh – 5%
- ₹6-9 lakh – 10%
- ₹9-12 lakh – 15%
- ₹12-15 lakh – 20%
- Above ₹15 lakh – 30%
The new system will simplify the previous six income categories into five. Taxpayers
can still segregate the prior regime, and for salaried and pensioners, the standard deduction for taxable income exceeding ₹15.5 lakh is ₹52,500 in the
new system.
Additional Reading: Union Upkeep Highlights 2022
Extension of standard deduction goody to pensioners
The Finance Minister spoken an extension of the standard deduction goody to the new tax regime for pensioners. Those earning a salary of ₹15.5 lakh or increasingly will goody from a standard deduction of ₹52,500.
Decrease in maximum tax rate
The maximum tax, including surcharge, will be 39% equal to the utterance made by FM Sitharaman during the presentation of Upkeep 2023. The previous highest tax rate of 42.74% was one of the highest in the world, and the FM proposed reducing the highest surcharge rate from 37% to 25% in the new tax regime, resulting in a subtract of the maximum tax rate to 39%.
Increase in leave encashment limit
Finally, the limit of ₹3 lakh for tax exemption on leave encashment for non-government salaried employees at retirement has not been updated since 2002, when the highest vital pay in the government was ₹30,000 per month. To alimony up with the increase in government salaries, the FM is proposing to increase this limit to ₹25 lakh.
New tax regime will be the default regime
The new income tax regime will be the default system. Taxpayers will still have the option to segregate the prior regime, but the new system will offer a standard deduction of ₹52,500 for taxable income whilom ₹15.5 lakhs for salaried and pensioners.
Experts hold that the government is encouraging the adoption of the new tax regime, which has increased the vital exemption limit to ₹3 lakh from ₹2.5 lakh. Individuals with income up to ₹7 lakh will now be exempt from taxes, compared to the previous limit of ₹5 lakh.
In Upkeep 2020-21, the government introduced an optional tax regime with lower tax rates for those who did not requirement specified exemptions and deductions such as HRA, home loan interest, and investments under sections 80C, 80D, and 80CCD. Total income up to ₹2.5 lakh was tax-free under this regime. The current tax slabs range from 5% for income between ₹2.5 lakh and ₹5 lakh to 30% for income whilom ₹15 lakh. These slabs will be revised as per the Upkeep announcement, constructive April 1st, 2023.
Psst…don’t forget to use our nifty tax calculator to summate the income tax value you will be required to pay. Click the sawed-off below.
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