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Five major announcements on Income Tax in Budget 2023-24

Date: February 01, 2023
# News

The Union Budget 2023-24 has introduced a slew of changes in the Income Tax slabs under the new tax regime, while the reduction of the surcharge rate from 37 per cent to 25 per cent will bring down the tax outgo for high-income groups.

Adhil Shetty, CEO, Bankbazaar.com, says, “Taxpayers earning above Rs 15 lakh will be taxed at 30% in both regimes. In the new regime, due to the enhanced tax brackets, the taxes for anyone earning more than Rs 15 lakh will marginally reduce, whereas nothing changes in the old regime. The government has proposed to reduce the highest surcharge rate from 37 per cent to 25 per cent in the new tax regime. It would mean lower taxes for anyone earning more than Rs 5 crore.”

New Tax Regime to be Default Regime

The new tax regime will now be the default tax regime, but citizens can still avail of benefits under the old tax regime on an opt-out basis.

“HNIs impacted by the high surcharge have reasons to be happy. Mid-income groups too. Essentially, income up to Rs 7.5 lakh a year is now tax-free. It will boost the sentiment of taxpayers at those income levels. Taxes may marginally reduce between Rs 7 lakh and Rs 15 lakh in the new regime. Taxpayers now need to evaluate if they still need to be in the old regime,” says Shetty.

The new regime is going to be the way forward as the default option. With its brackets frozen in 2013, the old regime may only be enhanced for a while and hence is becoming increasingly tougher to stick to. Taxpayers can use an online tax calculator to understand which regime best serves them. The new regime has no deductions barring standard deduction, which has now been added. The old regime still allows deductions such as home loans, insurance, provident fund etc., but its ‘‘real’’ rates are too high when adjusted for inflation, with the 30% slab essentially acting like a 40% one without bracket enhancements.

Rebate Increased

The finance minister has proposed in the Budget to increase the tax rebate. Therefore, the income rebate limit has now been increased to Rs 7 lakh from Rs 5 lakh in the new tax regime.

Revised tax slabs under the new tax regime

* Under the new tax regime, the income of Rs 0-3 lakh is nil.

* Income above Rs 3 lakh and up to Rs 6 lakh to be taxed at 5%

* Income of above Rs 6 lakh and up to Rs 9 lakh to be taxed at 10%

* Income above Rs 12 lakh and up to Rs 15 lakh to be taxed at 20% 

* Income above Rs 15 lakh to be taxed at 30%

Faster Processing of Tax Returns

The average processing time for income tax returns has been reduced from 93 days to 16 days. FM Nirmala Sitharaman said that “Our taxpayers’ portal received a maximum of 72 lakh returns in a day; processed more than 6.5 crore returns this year; average processing period reduced from 93 days in financial year 13-14 to 16 days now; and 45 per cent of the returns were processed within 24 hours.”

Common IT Return Forms

The government seeks to roll out next-gen common IT Return forms and strengthen grievance redressal mechanisms for taxpayers to help them resolve issues of income tax payments.