INCOME TAX REFORMS IN BUDGET 2022-23 - GOVERNANCE
News:
Budget 2023 | Zero tax for annual income up to ₹7 lakh under new scheme
What's in the news?
● Finance
Minister Nirmala Sitharaman announced that those earning up to ₹7 lakh a year need not pay any income tax under the new
tax regime, giving a push for the regime which disallows all exemptions on
investments.
Key takeaways:
● The
Government proposes to increase the
income tax rebate limit from ₹5 lakh to ₹7 lakh in the new tax regime.
New slabs:
● The
Minister added that the number of slabs would be reduced to five. The new slabs
will come into force with effect from April 1.
● There
were six income slabs starting from
₹2.5 lakh. Now, the tax slabs have been reduced and the limit has been raised
to ₹3 lakh.
○ No
tax for income up to ₹3 lakh
○ 5%
tax on ₹3-6 lakh
○ 10%
tax on ₹6-9 lakh
○ 15%
tax on ₹9-12 lakh
○ 20%
tax on ₹12-15 lakh and
○ 30%
on income above ₹15 lakh under new I-T regime.
● The
limit of ₹3 lakh for tax exemption on leave encashment on government salaried
employees. That was set in 2002 when government salaries were lower and is now
being raised to ₹25 lakh.
● A
person earning ₹9 lakh a year will now be paying just ₹45,000 instead of
₹60,000 currently. An individual with income of ₹15 lakh will have to pay ₹1.5
lakh tax down from ₹1.87 lakh under the new tax structure.
● The
highest tax rate in our country is 42.74%, it is among the highest in the
world. The highest surcharge rate will be reduced from 37% to 25% in the new
tax regime. This will result in the reduction of the maximum tax rate to 39%.
● Proposal
to extend ₹50,000 standard deductions to salary earners under the new tax
regime.
● The
new income tax regime will now become the default option, but people will still
have the option to go for the earlier regime.