In a huge relief to salaried and middle class, Union Finance Minister Nirmala Sitharaman, while presenting Union Budget 2023-24 in Parliament today, said the income tax rebate has been extended on income up to ₹7 lakh under the new tax regime, up from ₹5 lakh so far. The FM also announced there will not be any new tax for income up to ₹3 lakh.
According to the finance minister, the five major announcements in income tax will benefit India's "hard-working middle class". "The first one concerns rebate. Currently, those with income up to ₹5 lakh do not pay any income tax in both old and new tax regimes. I propose to increase the rebate limit to ₹7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to ₹7 lakh will not have to pay any tax," she said.
She also proposed to change the tax structure in the personal income tax regime by reducing the number of slabs and increasing the tax exemption limit to ₹3 lakh. "The new tax rates are 0 to ₹3 lakh - nil, ₹3 to 6 lakh - 5%, ₹6 to 9 lakh - 10%, ₹9 to 12 lakh - 15%, ₹12 to 15 lakh - 20% and above ₹15 lakh - 30%, " Finance Minister Nirmala Sitharaman said during her speech in Parliament.
She said in 2020, the government introduced the new personal income tax regime with 6 income slabs, starting from ₹2.5 lakh. "I propose to change the tax structure in this regime by reducing the number of slabs to 5 and increasing the tax exemption limit to ₹3 lakh."
The FM also announced the average processing time for income tax returns has also been reduced from 93 days to 16 days. "The government intends to roll out next-gen common IT return forms and strengthen grievance redressal mechanism," she added. According to the FM, the government has also proposed to reduce the highest surcharge rate to 25% from 37% under the new tax regime.
The finance minister said the I-T portal received a maximum of 72 lakh returns in a day; processed more than 6.5 crore returns this year; average processing period reduced from 93 days in financial year 13-14 to 16 days now; and 45% of the returns were processed in 24 hours.
Reacting to the development, experts says the move will immensely benefit salaried people and the middle class. “In simple words, the enhancement of this limit to seven lakh rupees means that the person whose income is less than ₹7 lakh need not invest anything to claim exemptions and the entire income would be tax-free irrespective of the quantum of investment made by such an individual,” says Abhishek A Rastogi, founder, Rastogi Chambers.
"FM Nirmala Sitharaman wooed hardworking middle class by proposing tax exemption up to ₹7 lakh. An individual, with an annual income of 9 lakh, will pay only 5% and those with income up to ₹15 lakh will pay 10% tax. The highest surcharge under personal income tax has been slashed from 37% to 25% under the new tax regime," says Jyoti Bhandari, founder and CEO, Lovak Capital.
The FM during her speech said under the new tax regime, an individual with an annual income of ₹9 lakh will be required to pay only ₹45,000 tax i.e. 5% of income. "It is a reduction of 25% on what he or she is required to pay now, ie, ₹60,000. Similarly, an individual with an income of ₹15 lakh would be required to pay only ₹1.5 lakh or 10% of his or her income, a reduction of 20% from the existing liability of ₹1,87,500."
