In her Union Budget speech, Finance Minister Nirmala Sitharaman proposed to raise the income tax rebate limit from Rs 5 lakh to Rs 7 lakh in the new tax regime. Sitharaman announced that individuals with annual taxable income of up to Rs 7 lakh will not be required to pay any income tax under the new tax regime option, which was announced in 2020. She also announced changes in tax slabs under the new tax regime, saying that the applicable tax rate for the income bracket of Rs 6-9 lakh will be 10 per cent. This has led to some confusion over whether or not income of up to Rs 7 lakh is exempt from tax under the new income tax regime. Who exactly benefits from this, and how? Put simply, only those with an annual income of up to Rs 7 lakh under the new tax regime will benefit from the proposal, as they will get a 100 per cent rebate on their tax liability. On the other hand, those with incomes over Rs 7 lakh will have to pay tax as per the slabs of the new tax regime. This is because the zero-tax benefit is a rebate and not an exemption, and this rebate is being offered to only those with an annual taxable income of up to Rs 7 lakh. Let us illustrate this with examples. Suppose Mr A has had an annual taxable income of Rs 6,99,000 per annum. Mr A would be a happy man today as he will not be required to pay any personal income tax for the financial year 2023-24. Now let us take the example of Mr B, who is Mr A's senior at work and has a taxable income of Rs 7,50,000 per year. Unlike Mr A, Mr B will be liable to pay Rs 30,000 as income tax for the full year. This is because Mr B does not qualify for the rebate announced by Sitharaman as he is earning more than the qualifying ceiling for the rebate. So, Mr B will have to pay tax on his entire income as per the rate slabs: nil on Rs 0-3 lakh, 5 per cent on Rs 3-6 lakh, and 10 per cent on Rs 6-9 lakh. So Mr B will have to pay Rs 15,000 as income tax for the Rs 3-6 lakh slab, and another Rs 15,000 (at 10 per cent rate) for the next slab. Had Sitharaman announced a tax exemption, and not rebate, on income of up to Rs7 lakh per year, Mr B too could have benefitted. Union Budget 2023: All you need to know ↗️ Finance Minister Nirmala Sitharaman's Union Budget 2023 has some big takeaways ↗️ First, what everyone has been looking forward to: changes in the new income tax regime. She has made the new tax regime more attractive. There are changes in the rebate limit and in tax slabs. What does this mean for the taxpayer? ↗️ FM Sitharaman proposed a 33% increase in capital investment outlay, raising it to Rs 10 lakh crore. This is the biggest in the past decade. What does it mean? ↗️ Some articles get cheaper and others get costlier due to changes in customs duty. Here is a list ↗️ The capital outlay for the railways has been increased to the highest ever - Rs 2.40 lakh crore. The government is trying to create more jobs ↗️ FM Sitharaman said the fiscal deficit will fall to 5.9% of the GDP. What does it mean for the stakeholders? ↗️ The FM called it the 'first Budget of Amrit Kaal'. PM Narendra Modi said it will build a strong foundation for a developed India. What did opposition leaders say?
