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Budget 2023: As per the current income tax provisions, an individual is required to pay taxes based on slab rates. Here's what changes are expected to happen
The government is likely to lower income tax rates and introduce revised slabs for salaried individuals in its upcoming Budget 2023 due on February 1, reported CNBC Aawaz. At the same time, the middle class can hope for many more reliefs. According to the report, there is a special emphasis on the middle class in the meetings being held on the budget among the officers.
At present the first priority of the government is to give relief in income tax structure, sources were quoted as saying in the report.
What will change?
The report said that there may be a reduction in the tax rates in the new income tax regime. The government may reduce the 30 percent and 25 percent tax rate under the new regime.
Additionally, efforts can be made to bring the new income tax at par with the old income tax.
In order to give relief to the home buyers, the government may also consider increasing the relief related to housing loans in the budget.
What is the government saying?
Though speculations are high, no official statement has been released by the government on the reduction of income tax rates. However, Finance Minister Nirmala Sitharaman on Monday said that she understands the pressures of the middle class as she too belongs to the same strata.
She also added that the present BJP government has not imposed any fresh taxes on the middle class. The Union Minister further said those having an income of up to Rs 5 lakh are exempt from income tax and that no fresh taxes have been imposed on the middle class.
Sitharaman was speaking at a function organised by the RSS-associated weekly Panchjanya magazine.
What are the expectations?
Citizens are awaiting the Budget announcements related to income tax slabs. The tax rate for individuals has not been changed since the FY2017-18. The only change that was introduced in February 2020 was the ‘New Tax Regime’. Now, experts want Budget 2023 to make changes to the slab rates to give more purchasing power to individuals and some relief to the employed taxpayers.
The current tax structure
With the new tax structure, individuals currently have the choice of paying tax under the new slab with lower rates but foregoing deductions or continue paying tax under the existing tax laws and claiming the applicable exemptions.
There are three categories of individual taxpayers: Individuals (below the age of 60 years) which include residents as well as non-residents, resident senior citizens (60 years and above but below 80 years of age) and resident super senior citizens (above 80 years of age).
New tax regime
Currently, 7 income slabs are available under the new tax regime. According to it, annual income up to Rs 2.5 lakh is exempt from tax. Those individuals earning between Rs 2.5 lakh and Rs 5 lakh have to pay 5 percent tax. Income between Rs 5 and 7.5 lakh is taxed at 10 percent, while those between Rs 7.5 and 10 lakh at 15 percent.
Those earning between Rs 10 and 12.5 lakh have to pay tax at the rate of 20 percent, while those between Rs 12.5 and Rs 15 lakh have to pay at the rate of 25 percent. Income above Rs 15 lakh is taxed at 30 percent.
Old tax regime
According to the old tax regime, if the total income of an individual is not more than Rs 2.5 lakh, the tax rate is nil. If the income falls in Rs 2.5 lakh-Rs 5 lakh bracket, 5 percent income tax is payable. However, those earning up to Rs 5 lakh can claim a rebate of Rs 12,500 under Section 87A of the Income Tax (I-T) Act.
For individuals earning Rs 5 lakh to Rs 10 lakh, tax is deducted at the rate of 20 percent. If the total income of an individual is more than Rs 10 lakh, 30 percent tax is payable.
Here’s a comparison between both the regimes:
|New tax slab rates||Old tax slab rates|
|Income from Rs 2.5 lakh to Rs 5 lakh||5%||Income from Rs 2.5 lakh to Rs 5 lakh||5%|
|Income from Rs 5 lakh to Rs 7.5 lakh||10%||Income from Rs 5 lakh to Rs 10 lakh||20%|
|Income from Rs 7.5 lakh to Rs 10 lakh||15%||Income above Rs 10 lakh||30%|
|Income from Rs 10 lakh to Rs 12.5 lakh||20%|
|Income from Rs 12.5 lakh to Rs 15 lakh||25%|
|Income above Rs 15 lakh||30%|