5 income tax rule changes announced in Budget 2023
A tax regime
refers to the system of tax rates, slabs, deductions, and exemptions that apply to individual taxpayers in a particular country. The tax regime is determined by the government of the country and can be different for different types of taxes, such as income tax, sales tax, or property tax.
The tax regime specifies the rates at which taxes are levied on different types of income or transactions, the thresholds or slabs based on income levels, and the deductions and exemptions that are available to reduce the tax liability. The tax regime is designed to ensure that the government can raise revenue to meet its expenditure needs while minimizing the burden on taxpayers.
example
in India, the income tax regime consists of various tax slabs ranging from 0% to 30% based on the income level of an individual. There are also several deductions and exemptions available such as standard deduction, deductions under Section 80C, 80D, and others.
Different tax regimes can have different impacts on the economy, and different tax regimes can be more favorable to different income groups or types of taxpayers. Therefore, it is important to understand the tax regime applicable to you and make informed decisions regarding tax planning and compliance
Whether the old tax regime or the new tax regime is better
for an individual depends on their individual circumstances, income level, and the deductions and exemptions they are eligible for.
Under the old tax regime, taxpayers can claim various deductions and exemptions, such as deductions for investments in tax-saving instruments under Section 80C, interest paid on a home loan, medical insurance premium under Section 80D, etc. These deductions can significantly reduce the taxable income and help in reducing the tax liability.
However, the new tax regime offers lower tax rates without the benefit of most of these deductions and exemptions. This means that taxpayers can have a lower tax liability if they do not have many deductions or if the deductions are not sufficient to bring down their taxable income significantly.
So, the best tax regime for an individual depends on their individual situation, including their income level, the deductions and exemptions they are eligible for, and their preference for simplicity vs. maximizing tax savings.
It's advisable to consult a tax professional or use online tax calculators to determine which tax regime would be best for your individual situation
5 income tax rule changes announced in Budget 2023
Introduction
The Budget 2023 has brought in some significant changes in the income tax rules, which will affect taxpayers of all income groups. The new tax regime has been designed to simplify the tax structure and reduce the tax burden on the middle class. In this blog, we will discuss the five income tax rule changes announced in Budget 2023 and their impact on taxpayers.
Tax rebate limit raised to ₹7 lakh from ₹5 lakh
new tax regime. The Finance Minister has proposed to increase the tax rebate limit to ₹7 lakh from the current limit of ₹5 lakh. This means that individuals with an income of up to ₹7 lakh will not have to pay any tax. The enhancement of this limit to ₹7 lakh means that the person whose income is less than ₹7 lakhs 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. This will result in giving more consumption power to the middle-class income group as they could spend the entire amount of income without bothering too much about investment schemes to take the benefit of exemptions.
Changes in Income Tax slabs
The Finance Minister has proposed to reduce the number of tax slabs from six to five and increase the tax exemption limit to ₹3 lakh. The new tax rates are
Income SlabTax Rate0-3 lakh Nil
3-6 lakh. 5%
6-9 lakh. 10%
9-12 lakh. 15%
12-15 lakh. 20%
Above 15 lakh 30%
The new system will decrease the six income categories
to five. Tax assessors will still be able to choose from the prior regime. Salaried and pensioners: the new system's standard deduction for taxable income exceeding Rs15.5 lakhs is ₹52,500
Standard Deduction for Pensioners
For pensioners, the Finance Minister has announced extending the benefit of standard deduction to the new tax regime. Each salaried person with an income of ₹15.5 lakh or more will benefit by ₹52,500.
Leave Encashment
The Finance Minister has proposed to increase the tax exemption limit on leave encashment on retirement of non-government salaried employees from ₹3 lakh to ₹25 lakh. This limit was last fixed in the year 2002 when the highest basic pay in the government was ₹30,000 pm. In line with the increase in government salaries, the Finance Minister has proposed to increase this limit.
Maximum tax, along with surcharge, will be 39%: The Finance Minister has proposed to reduce the highest surcharge rate from 37% to 25% in the new tax regime. This would result in a reduction of the maximum tax rate to 39%. Tax rates have been reduced under the new tax regime and the maximum marginal rate drops from 42.74% to 39%.
The new tax regime has brought in some significant changes in the income tax rules, which will affect taxpayers of all income groups. The changes aim to simplify the tax structure and reduce the tax burden on the middle class. The increase in tax rebate limit and standard deduction for pensioners will provide relief to the middle-class taxpayers, whereas the reduction in maximum tax rate will benefit the high-income taxpayers. The increase in the limit of tax exemption on leave encashment on retirement of non-government salaried employees will be beneficial for employees in the private sector. The table below summarizes the changes in the income tax rules announced in Budget 2023
What should be the top tax priority of the Union Budget 2023, to help the common man ?
.jpg)
.jpg)
মন্তব্যসমূহ