Giving some relief to the Indian middle class, Union Finance Minister Nirmala Sitharaman has announced to increase the tax exemption limit to Rs 3 lakh and the rebate limit from Rs 5 lakh to Rs 7 lakh under the new tax regime.
The new tax regime will now be the default tax regime, Nirmala Sitharaman said during her budget speech on Wednesday, February 1.
The new income tax rates are:
What it means: So, under the new tax regime, if you earn up to Rs 7 lakh a year, you will have to pay NO TAX.
🚨 #Budget2023 #IncomeTax:
— Ananya Bhattacharya (@ananya116) February 1, 2023
💰 If you earn Rs 9 lakh a year, you have to pay Rs 45,000 👇
• First 3 lakh: 0
• Next 3 lakh: Rs 15k (5%, Rs 3-6 lakh)
• Next 3 lakh: Rs 30k (10%, Rs 6-9 lakh)
• Total tax on Rs 9 lakh: Rs 45,000 (Rs 15,000 + 30,000)
🚨 #Budget2023 #IncomeTax
— Ananya Bhattacharya (@ananya116) February 1, 2023
💰 If you earn Rs 15 lakh a year, you have to pay Rs 1.5 lakh 👇
• First 3 lakh: 0
• Next 3 lakh: Rs 15k (5%, Rs 3-6 lakh)
• Next 3 lakh: Rs 30k (10%, Rs 6-9 lakh)
• Next 3 lakh: Rs 45k (15%, Rs 9-12 lakh)
• Next 3 lakh: Rs 60k (20%, Rs 12-15 lakh)
What the FM said: "I introduced in 2020, the new personal income tax regime with 6 income slabs, starting from Rs 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 Rs 3 lakh," she said.
Reduction in tax:
"The highest tax rate in our country is 42.74%, it is among the highest in the world. I propose to reduce the highest surcharge rate from 37% to 25% in the new tax regime. This will result in the reduction of the maximum tax rate to 39%," the FM said.
So, what were the old income tax slabs?
Tax queries answered:
Q: How much tax rebate we have now?
A: Rs 7 lakh per year from Rs 5 lakh per year
Q: What's the catch?
A: Enhanced rebate is only under the new regime.
Q: Do I pay nil income tax under the new regime?
A: Yes
Q: What if I earn more than Rs 7 lakh/year?
A: The FM has cut tax rates in 6 new slabs:
3-6 lakh - 5%
6-9 lakh - 10%
9-12 lakh - 15%
12-15 lakh - 20%
15 lakh and above - 30%