Union Budget 2023 : FM Announces New Income Tax Rates; Slabs Reduced To 5, Exemption Raised To Rs 3 Lakhs In New Regime

In her Budget 2023-24 speech, Union Finance Minister Nirmala Sitharaman has announced that the increase in the income tax rebate limit from Rs. 5 Lakhs To Rs. 7 Lakhs in the new tax regime.

For the middle class person, the proposal under the new income tax regime has been a huge relief. This would mean that an individual with an annual income of up to Rs 7 lakh will not be required to pay income tax.

The new income tax system will take over as the standard system. But if someone wants to stick with the old one, they can still benefit from it.

"We are also making the new income tax regime the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime", the Minister said.

New tax structure announced for new tax regime

"I had introduced in 2020 the new personal income tax regime with 6 income slabs starting from 2.5 lakhs. I propose to change the tax structure in this regime by reducing the number of slabs to five and increasing the tax exemption limit to Rs 3 lakhs", Sitharaman said.

The new tax rates are :

• 0-3L: nil
• 3-6L: 5%
• 6-9L: 10%
• 9-12L: 15%
• 12-15L: 20%
• above 15L: 30%

"This will provide major relief to all tax payers in the new regime. An individual with an annual income of Rs 9 lakhs will be required to pay only 45,000 rupees, this is only 5% of his or her income. It is a reduction of 25% of what he or she is required to pay now, that is 60,000. So in the place of 60,000 it is only 45,000. Similarly, an individual with an income of Rs 15 lakhs would be required to pay only 1.5 lakh or 10% of his or her income- a reduction of 20% from the existing liability of 1,87 500 rupees", she said.

For reading more on tax cases, please visit LiveLaw's exclusive tax section.