5 Income tax rule changes announced in Budget 2023

During the Union Budget speech, Union Finance Minister Nirmala Sitharaman announced the change in income tax rules, up to ₹7 lakh rebate under the new income tax regime.

FM Sitharaman said “I propose to increase the rebate limit to 7 lacks in the new tax regime thus persons in the new tax regime with income up to seven lakhs will not have to pay any tax at all. The second proposal relates to middle-class individuals I introduced in the year 2020 the new personal income tax regime with six income slabs starting from 2.5 lacks. I propose to change the tax structure in this regime by reducing the number of slabs to five and increasing the tax exemption limit to 3 lakhs”.

Here are the 5 income tax rules in Budget 2023:

Tax rebate limit raised to ₹7 lakh from ₹5 lakh:

According to Abhishek A Rastogi, Founder of Rastogi Chambers, increasing this limit to 7 lakh means that a person whose income is less than 7 lakhs does not need to invest anything to claim exemptions, and the entire income is tax-free regardless of the quantum of investment made by such an individual.

This will give the middle-class income group more consumption power because they will be able to spend their entire income without worrying about investment schemes to take advantage of tax breaks, he added.

Changes in Income Tax slabs:

“In the new regime, I propose to reduce the number of tax slabs to five and increase the tax exemption limit to 3 lacks,” FM Sitharaman said.

The new tax rates are

0-3 lakh – nil

3-6 lakh – 5%

6-9 lakh- 10%

9-12 lakh – 15%

12-15 lakh – 20%

above 15 lakh- 30%

Salaried and pensioners: The standard deduction under the new system for taxable income exceeding Rs15.5 lakhs is Rs. 52,500,” said Amit Gupta, MD, SAG Infotech.

For retirees, the finance minister announced that the standard deduction would be extended to the new tax regime. Each salaried person earning 15lackshks or more will benefit by 52,500.

“Our country’s highest tax rate is 42.74 percent. This is one of the highest levels in the world. I propose lowering the highest surcharge rate from 37% to 25% in the new tax regime. “As a result, the maximum tax rate would be reduced to 39%,” FM stated while presenting Budget 2023.

The limit of Rs 3 lakh for tax exemption on leave encashment on the retirement of non-government salaried employees was last fixed in 2002. When the highest basic pay in the government was 30,000. In line with the increase in government salaries, I propose raising this limit to Rs. lacks.

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