The Finance Minister Nirmala Sitharaman has made a major announcement in the 2023 Budget, regarding the revision of the Income Tax Slab. The new tax regime offers a rebate of up to Rs 7 lakh, meaning that individuals with an annual income of up to Rs 7 lakh will not have to pay any income tax. The New Tax Regime will be the default tax system, however, citizens can still opt for the Old Tax Regime if they wish to take advantage of its benefits.
The New Tax Regime features 5 income slabs, with tax rates ranging from nil to 30% as follows:
0-Rs 3 lakh: Nil
Rs 3-6 lakh: 5%
Rs 6-9 lakh: 10%
Rs 9-12 lakh: 15%
Rs 12-15 lakh: 20%
Above Rs 15 lakh: 30%
Additionally, the standard deduction for individuals with an income of up to Rs 15 lakh is Rs 52,400, as stated by the FM.
Individuals can choose to pay tax under the new regime and forgo the deductions or continue to pay tax under the existing laws and claim the applicable exemptions. The old tax regime has 7 income slabs, with an annual income of up to Rs 2.5 lakh being exempt from tax. Those with an income between Rs 2.5 lakh and Rs 5 lakh are taxed at 5%, while those earning between Rs 5 lakh and Rs 7.5 lakh are taxed at 10%. Individuals earning between Rs 7.5 lakh and Rs 10 lakh are taxed at 15% and those earning between Rs 10 lakh and Rs 12.5 lakh are taxed at 20%. Finally, those with an income above Rs 15 lakh are taxed at 30%.
The announcement of the revised Income Tax Slab by FM Sitharaman is a significant decision that aims to provide relief to individuals with lower incomes.