New Delhi: Finance minister Nirmala Sitharaman on Wednesday announced no tax for those with annual income of up to rupees seven lakhs under the new tax regime but made no changes for those who continue in the old regime that provides for tax exemptions and deductions on investments and expenses such as HRA.
In what is being seen as push for salaried class taxpayer to switch to new tax regime where no exemptions on investments is provided, the finance minister in her budget for 2023-24 allowed a standard deduction of Rs 50,000 under the new regime. The old tax regime provides for a similar deduction and no tax on income up to Rupees five lakh. Also, the basic exemption limit has been raised to Rupees three lakhs from Rs 2.5 lakh. A Rs 2.5 lakh basic exemption limit is prescribed in old tax regime.
The move will lead to a saving of Rs 33,800 for those earning up to Rupees seven lakhs annually and opting for new tax regime. Those with income up to Rs 10 lakh would save Rs 23,400 and Rs 49,400 saving would accrue to those earning up to Rs 15 lakh. For high salary people, Sitharaman also reduced surcharge from 37 percent to 25 percent for high-net-worth individuals with income above Rupees two crores.
This would translate into a saving of around Rs 20 lakh for those having a salary income of about Rs 5.5 crore. In her Budget speech, Sitharaman said currently individuals with total income of up to Rupees five lakh do not pay any tax due to rebate. "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 Rupees seven lakh," Sitharaman said, adding that the number of slabs would be reduced to five.
Under the revamped new tax regime, no tax would be levied for income up to Rupees three lakhs. Income between Rs 3-6 lakh would be taxed at five percent, Rs 6-9 lakh at 10 percent, Rs 9-12 lakh at 15 percent, Rs 12-15 lakh at 20 percent and income of Rs 15 lakh and above will be taxed at 30 percent.
"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," Sitharaman said.
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