Clipped from: https://www.financialexpress.com/money/income-tax/what-budget-2023-has-for-middle-class-taxpayers/2970801/
The middle class had built up much hope on this Budget on likely tax relief, as there has not been any change in individual tax rates since 2017-18.
To meet the long-standing demand of widening the tax slabs, the Budget proposes a change in the slab tax rates under the New Tax Regime.
The Finance Minister on Wednesday presented the last full-fledged Union Budget of the current government before the 2024 Lok Sabha elections.
The middle class had built up much hope on this Budget on likely tax relief, as there has not been any change in individual tax rates since 2017-18. While the New Tax Regime was introduced effective FY 2020-21, the tax rate did not undergo any change.
The Finance Minister started her proposals on personal income tax with a specific focus on the hard-working middle class. Further, in her endeavour to give thrust to the New Tax Regime which had not seen much traction in the past, there was specific focus on the tax benefits under the new regime. Accordingly, out of 5 major announcements made under personal income tax, three have been for middle class salaried individuals, opting for the New Tax Regime, in addition to the benefit on taxability of leave encashment.
Also Read: Old vs New Tax Regime: How will Budget 2023 benefit taxpayers under both regimes?
The Budget proposes to increase the tax rebate under Section 87A from INR 5 lakhs to INR 7 lakhs under the New Tax Regime. As a result, a resident individual earning taxable income of up to INR 7 lakhs would have tax savings of INR 33,800.
To meet the long-standing demand of widening the tax slabs, the Budget proposes a change in the slab tax rates under the New Tax Regime, as under:
Further there is also a proposal to introduce standard deduction under the New Tax Regime, which was not available earlier. Accordingly, standard deduction of INR 50,000 and deduction of INR 15,000 against family pension is proposed to be available, thereby resulting in net benefit of INR 56,400 (including cess) on an income limit of INR 15.5 lakh and above.
Besides the changes proposed under the New Tax Regime, the Finance Minister has also proposed the increase in the leave encashment exemption from INR 3 lakhs to INR 25 lakhs.
Further, one of the important points to note is that now the New Tax Regime is proposed to be the default tax regime. Accordingly, in case anyone wants to opt for the Old Tax Regime, they would need to take specific action for the same.
All in all, while a lot more was expected from this Budget by the middle class, the proposed changes should still bring some cheer to the common man.
(By Divya Baweja, Partner, Deloitte India, and Preeti Gupta, Senior Manager, Deloitte Haskins and Sells LLP. Views expressed are personal)