No tax on earning up to 7 lakh, salaried people received these benefits in the budget

Finance Minister Nirmala Sitharaman presented the budget for the financial year 2023-24 on February 1. Many changes have been made in the budget on the personal taxation front so that the hard working salaried class can get some relief. However, all major changes have been made in the new tax regime. This system was introduced in the budget of the year 2020. This regime offers lower tax rates for taxpayers who do not avail rebates and deductions. It has also been decided to make the new tax regime the default tax regime. However, the option to choose the old tax regime will remain intact.

Under the new tax regime, the tax rebate has been increased from Rs 5 lakh to Rs 7 lakh. This means that in the new tax regime, taxpayers will not have to pay any tax on annual income up to Rs 7 lakh. As per the old tax system, as of now this limit is only up to Rs.5 lakh. To know how the budget 2023 impacts you and your taxes visit 5paisa.com.

Apart from this, the number of tax slabs has been reduced from 6 to 5 in the new tax regime. Also, the basic exemption limit has been increased to Rs 3 lakh. Following are the proposed rates under the new tax regime. There is no tax on the income of 0 to 3 lakh. 5% on income of Rs 3,00,001 to 6 lakh, 10% on income of Rs 6,00,001 to 9 lakh, 15% on income of Rs 9,00,001 to 12 lakh, 20% on income of 12,00,001 to 15 lakh and 30%  tax will be levied on annual income of more than 15 lakh.

Keeping in mind the fact that India is one of the countries with the highest tax rates. Apart from the change in tax slabs in the budget, it has been proposed to reduce the maximum rate of surcharge in the new tax regime from 37 percent to 25 percent. These rates will apply to income above Rs 5 crore.

Until now the benefit of standard deduction was available only in the old tax regime. Standard deduction will also be available in the new tax regime from the next financial year. This benefit will be given to salaried and pensioners. According to the budget speech of the Finance Minister, every salaried person, whose income is Rs 15.5 lakh or more, will get a benefit of Rs 52,500 as a result.

In Budget 2023, the government has increased the tax exemption limit on leave encashment from Rs 3 lakh to Rs 25 lakh, providing a big relief to private employees. Earlier, in the year 2002, it was increased to Rs 3 lakh.

Which is better in the old and proposed new tax regime, let us understand it with an example. Here we shall compare the two scenarios for a person with Rs 10 lakh annual income.

Rs 10 lakh                                         Old tax regime         New regime

Total income                                   Rs 10,00,000           Rs  10,00,000

Less Standard Deduction                -Rs 50,000              Rs   -50,000

Less Sec 80C deductions                  -1,50,000                       –

Income from house property          -1,00,000                       –

Net taxable income                       Rs 7,00,000                Rs  9,50,000

TAX                                                    Rs 52,500                  Rs 52,500

Rs 0-2.5 lakh                                       0                                     0                    Rs 0-3 lakh
Rs 2.51-5 lakh @5%                          12,500                    Rs 15,000            Rs 3-6 lakh @5%
Rs 5-7 lakh @20%                          40,000                      Rs 30,000          Rs 6-9 lakh @10%
—                                                              —                             Rs 7,500           Rs 9-9.5 lakh @15%
Cess @ 4@                                       Rs 2,100                   Rs 2,100
Total Tax                                          Rs 54,600                Rs 54,600