Union Budget 2023 has finally considered to the revise the personal income tax rule that hasn’t been changed since 2014. The new rule was represented by Finance Minister Nirmala Sitharaman. The upcoming rules consider accounting for the benefits in the favor of hard-working middle-class people.
The 5 new rules will enrich finance management and thus favor people with low to medium-range salaries. Here’s a list of 5 new rules that will be commenced under the new Personal Income Tax rule.
5 Personal Income Tax Rules
- Tax Rebate Increment
- Tax Slabs Renewal
- Allowances for Pensioners
- Maximum Tax Management
- Leave Encashment
Nirmala Sitharaman presented the Union Budget 2023 in parliament today. She started with a list of beneficiaries for all the government schemes and private sectors. However, she lastly came to the prime topic that every middle-class person was waiting for i.e. personal income tax. She started with “Now, I come to what everyone is waiting for personal income tax. I have five major announcements to make in this regard. These primarily benefit our hard-working middle class.
Tax Rebate Increment
Currently, those with income up to Rs 5 lakh do not have to pay any income tax in the old or new tax regimes. Now, the rebate limit has been increased to Rs 7 lakh in the new tax regime. Thus, people with income up to Rs 7 lakh won’t have to pay any income tax under the new tax regime.
Tax Slabs Renewal
The second scheme directly favors middle-class people. In 2020, the personal tax regime included six tax slabs starting from Rs 2.5 lakh. This year the tax structure will include only five slabs with an increased tax exemption limit of 3 lakhs. Here’s a list of new tax regimes:
|
Rs 0-3 lakh |
Nil |
|
Rs 3-6 lakh |
5 per cent |
|
Rs 6-9 lakh |
10 per cent |
|
Rs 9-12 lakh |
15 per cent |
|
Rs 12-15 lakh |
20 per cent |
| Above 15 lakh |
30 per cent |
Allowances for Pensioners
The new tax regime will benefit pensioners as well. The government has announced extending the benefits of standard deductions to the new tax regime. Moreover, every salaried person with an income of Rs. 15.5 lakhs or more will benefit by Rs 52,500.
Maximum Tax Management
Currently, our country pays the highest amount of tax in the world. We are currently paying a tax rate of 43.74 per cent. The new budget has announced to reduce of this surcharge from 37 per cent to 25 per cent. As a result, the new highest tax rate will be reduced to 39 per cent under the new tax regime.
Leave Encashment
The tax exemption for the retirement of non-government salaried employees was last changed in 2002. The limit of tax exemption has remained at Rs 3 lakh since then. The highest basic pay in 2002 was Rs 30,000. Now, under the new tax regime, the government has increased the limit to Rs 25 lakh considering the increase in the salaries of government employees.
The revised personal income tax will provide major relief to all taxpayers in the new regime. An individual with an annual income of Rs 9 lakh will be required to pay only Rs 45,000/-. This is only 5 per cent of his or her income. It is a reduction of 25 per cent on what he or she is required to pay now, i.e. Rs 60,000/-. Similarly, an individual with an income of Rs 15 lakh would be required to pay only 1.5 lakhs or 10 per cent of his or her income, a reduction of 20 per cent from the existing liability of Rs 1,87,500/.
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