Key Changes in Taxation: Budget 2023
The highest tax rate which in our country is 42.74 per cent. This is among the highest in the world. I propose to reduce the highest surcharge rate from 37 per cent to 25 per cent in the new tax regime. This would result in reduction of the maximum tax rate to 39 per cent.
The Budget 2023 announcements made by the Finance Minister have given a significant boost to the new tax regime, providing encouragement to taxpayers at both ends of the income spectrum. With no tax liability for those with an annual income up to 7 lakhs and a reduction in the surcharge for those with an annual income above 5 crores, from 37% to 25%, the new tax regime is poised for success.
Benefit for New Regime
By raising the limit to ₹7 lakh, individuals earning less than that amount will no longer have to make any investments in order to claim exemptions, and their entire income will be tax-free regardless of their investment level. This provides more purchasing power to the middle-class, as they can now spend their entire income without worrying about investing for tax benefits, according to the expert.
Changes in Standard Deduction for Salaried
The Honorable Finance Minister declared in the Budget 2023 the extension of the standard deduction benefit to the new tax regime, which will be advantageous to salaried individuals earning an income of ₹15.5 lakh or more. This will result in a savings of ₹52,500.
Reduction in Overall Tax
I plan to change the tax structure in the new regime by reducing the highest surcharge rate from 37% to 25%. This change would result in a decrease of the highest tax rate from 42.74% to 39%, which is currently one of the highest in the world, says Finance Minister.
New Tax Slab Rate (New Regime)
The Finance Minister, Nirmala Sitharaman, has proposed a change in the tax structure in the new tax regime. This change involves reducing the number of tax slabs to five, making it simpler and easier to understand. Additionally, the tax exemption limit has been increased to ₹3 lakh, providing relief to taxpayers and allowing them to keep more of their hard-earned income. This proposal aims to simplify the tax system and provide more benefits to taxpayers.
0-3 lakh - nil
3-6 lakh - 5%
6-9 lakh- 10%
9-12 lakh - 15%
12-15 lakh - 20%
above 15 lakh- 30%
Leave Encashment
Lastly, the non-government salaried employees' tax exemption limit for leave encashment upon retirement was set at ₹3 lakh in 2002, when the highest government basic pay was ₹30,000 per month. Keeping in mind the rise in government salaries, it is proposed to increase this limit to ₹25 lakh.