New Delhi, Feb 1 (UNI) Union Finance Minister Nirmala Sitharaman on Wednesday brought smiles to hard-working middle class by making five major budget announcements with respect to personal income tax.
These announcement pertains to rebate, change in tax structure, extension of benefit of standard deduction to the new tax regime, reduction of highest surcharge rate and extension of limit of tax exemption on leave encashment on retirement of non-government salaried employees.
“These proposals will provide substantial benefits to the working middle class,” she said while presenting 2023-24 Union Budget in the Parliament here.
The regime, with income up to Rs 7 lakh will not have to pay any tax, Sitharaman said. “Currently, those with income up to Rs 5 lakh do not pay any income tax in both old and new tax regimes,” she said.
Providing relief to middle class individuals, Sitharaman proposed a change in the tax structure in the new personal income tax regime by reducing the number of slabs to five and increasing the tax exemption limit to Rs 3 lakh.
The new tax rates are: Upto 0-3 lakh (nil), from 3-6 lakh (5 percent), from 6-9 lakh (10 percent), from 9-13 lakh (15 percent), from 12-15 lakh (20 percent) and above 15 lakh (30 percent).
The new tax rates will provide major relief to all tax payers in the new regime, she said.
“An individual with an annual income of Rs 9 lakh will be required to pay only Rs 45,000. This is only 5 per cent of his or her income. It is a reduction of 25 per cent on what he or she is required to pay now, i.e. Rs. 60,000,” Sitharaman explained.
“Similarly, an individual with an income of Rs 15 lakh would be required to pay only Rs 1.5 lakh or 10 per cent of his or her income, a reduction of 20 per cent from the existing liability of Rs 1,87,500,” she added.
The third proposal of the budget, Sitharaman said provides major relief to the salaried class and the pensioners including family pensioners as she propoed to extend the benefit of standard deduction to the new tax regime.
Each salaried person with an income of Rs 15.5 lakh or more will thus stand to benefit by Rs 52,500, Sitharaman said.
At present, standard deduction of Rs 50,000 to salaried individuals and deduction from family pension up to Rs 15,000 is currently allowed only under the old regime, she said.
As part of her fourth announcement with respect to personal income tax, Sitharaman proposed to reduce the highest surcharge rate from 37 per cent to 25 per cent in the new tax regime for income above Rs 2 crore.
“This would result in reduction of the maximum tax rate to 39 per cent from the present 42.74 per cent, which is among the highest in the world,” she said.
However, no change in surcharge is proposed for those who opt to be under the old regime in this income group, Sitharaman said.
As part of the fifth announcement, the budget proposed extension of limit of tax exemption on leave encashment to Rs 25 lakh on retirement of non-government salaried employees in line with the government salaried class, Sitharaman said.
At present, the maximum amount which can be exempted is Rs 3 lakh, she said.
The budget proposed to make the new income tax regime as the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime, the finance minister said.