Union Budget 2023-24: No income tax up to Rs. 7L
Announcing the new Union Budget for 2023-24 today, Finance Minister Nirmala Sitharaman declared renewed income tax rates. Under the revised tax slabs, there is no income tax for those earning up to Rs. 7 lakh, the limit for the same was Rs. 5 lakh earlier. The new tax regime will be the default, while the old one will also remain simultaneously.
Why does this story matter?
- The government earlier hinted at lowering tax rates or raising the limit for tax rebates to make the new direct tax regime more attractive. However, the change was expected to bring the old tax regime to an end.
- The new income tax regime was introduced in 2020 with lower tax rates, and fewer deductions and exemptions to make tax compliance easier.
Here are the tax rates for the new tax regime
New tax regime hasn't gained much traction in 3 years
While citizens are calling for more exemptions, the government is inclined to make the tax regime exemption-less. This is a significant reason for the new tax regime not gaining adequate traction, coupled with a higher tax burden.
Basic exemption limit raised, ITR processing period reduced
The basic exemption limit has been hiked from Rs. 2.5 lakh to Rs. 3 lakh. For those aged above 80, the limit is Rs. 5 lakh. The highest surcharge rate was lowered from 37% to 25% under the new tax regime. While new Income Tax Return (ITR) forms were introduced for easier filing, the processing period for ITR was reduced to 16 days.
New tax regime doesn't grant adequate exemptions: Experts
Notably, citizens can choose which rates they want to be taxed under. Although the new regime aims at making tax compliance easier, experts say that it isn't very attractive as it doesn't allow exemptions on house rent and insurance. Experts batted for allowing deductions in income tax on the basis of investments in the Public Provident Fund (PPF) and other popular tax-saving schemes.
What are the current tax rates which have been changed
Currently, in the fiscal year 2022-23, an income of Rs 2.5-5 lakh is taxed at 5%, while Rs. 5-7.5 lakh attracts a 10% tax. Rs. 7.5 lakh to Rs. 10 lakh is taxed at 15%, Rs. 10 lakh to Rs. 12.5 lakh at 20%, Rs. 12.5 lakh to Rs. 15 lakh at 25%, and 30% for above Rs. 15 lakh.