Highlights:
- Union Budget 2023 Highlights
- What are the Current Income Tax Slabs?
- What are the New Income Tax Slabs?
The Government of India has been taking measures to ensure that citizens do not see taxes as a burden. The new tax regime and the changes that have been brought in the form of new income tax slabs are in this direction. In this article, we read about the new income regime, new income tax slabs and the new tax exemption limit. So, read on.
Union Budget 2023 Highlights
Before we tell you about the income tax structure in the new regime and new tax exemption limits, let us run you through the highlights of this year’s union budget. To start with, in terms of old vs new tax regime, the Government has reduced the number of tax slabs to 5 from 6. Under new income tax slabs, the basic exemption limit has been changed from Rs.2.5 Lakh to Rs.3 Lakh. In terms of old and new tax regime, taxpayers who earn up to Rs.7 Lakh a year will not be required to pay any taxes. This is because the government has increased the tax rebate limit available under Section 87A. Further, the government has also reduced the surcharge from 37% to 25%. These changes will automatically become effective in FY2023-24. However, borrowers can also choose to file taxes under the old regime.
Before we discuss the new income tax slabs, let us walk you through the old ones first.
What are the Current Income Tax Slabs?
The Indian Government levies taxes on taxpayers based on the income slab they fall into. In other words, the government follows a slab system and therefore, the income tax payable increases as an individual advances up the slab system and witnesses an increase in their annual income. The slab system of income tax payment is seen as the fairest way of applying taxes based on income.
Taxpayers must also know that as per the current income tax regime, slabs vary depending on the age of the borrower. However, this won’t be the case with the new tax regime. Read on to know more about the current income tax slabs.
Under the old slab, taxpayers were exempt from paying any tax on any income up to Rs.2.5 Lakh. The tax one had to pay on income above Rs.2.5 Lakh has been mentioned in the table below.
| Income | Tax Rate |
|---|---|
| 0-2.5 Lakh | NIL |
| 2.5 Lakh to 5 Lakh | 5% |
| 5 Lakh to 7.5 Lakh | 10% |
| 7.5 Lakh to 10 Lakh | 15% |
| 10 Lakh to 12.5 Lakh | 20% |
| 12.5 Lakh to 15 Lakh | 25% |
| Above 15 Lakh | 30% |
This tax regime became effective on April 1, 2020. However, taxpayers were given the option of filing taxes as per the new or old regime.
What are the New Income Tax Slabs?
Under the new tax regime, taxpayers are required to pay no taxes on income up to Rs.3 Lakh. Let us now look at the revised income tax slabs under the new tax regime.
| Income | Tax Rate |
|---|---|
| Up to Rs.3 Lakh | NIL |
| Rs.3 Lakh to Rs.6 Lakh | 5% |
| Rs.6 Lakh to Rs.9 Lakh | 10% |
| Rs.9 Lakh to Rs.12 Lakh | 15% |
| Rs.12 Lakh to Rs.15 Lakh | 20% |
| Rs.15 Lakh and Above | 30% |
Now, whether you are filing taxes under the old regime or the new regime, these are a few things that you must keep in your mind:
- Income Tax Laws state that salaried individuals can change their tax regime as per their convenience. In simpler words, a salaried individual can pay their taxes as per the new tax regime or old tax regime, i.e. whichever seems more beneficial to them in that financial year. However, when it comes to self-employed individuals or businessmen, the taxpayer can switch regimes only once in their life.
- Taxpayers must also know that unlike in the past and as opposed to old tax regimes, the new tax regime does not differentiate based on age. In the old tax regime, the basic exemption limit was Rs.2.5 Lakh for taxpayers under the age of 60. However, for taxpayers between the age of 60 and 80, this basic exemption limit was Rs.3 Lakh. However, as per the new tax regime, there is only one basic tax exemption limit, which is applicable to taxpayers of all ages and this is no tax on income up to Rs.3 Lakh.
- The government has proposed that it will revise the surcharge applicable. If your taxable income is up to Rs.50 Lakh, the surcharge will be 10%; if the taxable income goes beyond Rs.1 Crore, you will be charged a surcharge fee at 15% and if the taxable income is above Rs.2 Crore, the surcharge will be 25%.
Final Words
In this elaborate guide on the new tax regime and new tax exemption limits, we have tried to cover all the important topics. Now, use an income tax calculator to figure out your tax liability and figure out ways you can save tax.
