Budget 2023: Here is what it offers to tax payers

While announcing the Budget 2023 proposals, Finance Minister Nirmala Sitharaman offered some relief to the individual taxpayer. She attempted to reduce the tax burden by offering measures such as enhanced standard deduction and enhanced limit of rebate along with some tweaks in the tax rates.

Rebate for income up to Rs 7 lakh

Earlier the individuals with income up to Rs 5 lakh need not have to pay income tax due to the rebate available. However, the Union Budget 2023 has proposed to enhance this benefit to individuals earning income up to Rs 7 lakh in a financial year, in the new tax regime.

Under the old tax regime, the rebate under Section 87A is available for income up to Rs 5 lakh.

New tax regime gets better

The budget reduced the tax burden for individuals opting for the new tax regime.

In addition to enhanced limit for rebate, in the new tax regime, the basic exemption limit is increased to Rs 3 lakh. The number of tax slabs are also reduced to five as compared to six earlier. The benefit of standard deduction is also extended to the salaried class and the pensioners including family pensioners, in the new tax regime.

For incomes between Rs 3-6 lakh, the rate is 5 percent. For taxable income between Rs 6 lakh and Rs 9 lakh, the tax rate is now 10 percent. For taxable income between Rs 9-12 lakh, the tax rate is now 15 percent. For taxable income between Rs 12-15 lakh, the tax rate is now 20 percent. and for those whose taxable income is above Rs 15 lakh, the tax rate is 30 percent.

“An individual with an annual income of Rs 9 lakh will be required to pay only Rs 45,000. This is only 5 percent of his or her income. It is a reduction of 25 percent on what he or she is required to pay now, which amounts to Rs 60,000. Similarly, an individual with an income of Rs 15 lakh would be required to pay only Rs 1.5 lakh or 10 percent of his or her income, a reduction of 20 percent from the existing liability of Rs 1,87,500,” said Nirmala Sitharaman while presenting the Union Budget 2023 on February 1, 2023.

Rationalisation of Taxation for super rich

The highest rate of income tax is 42.74 percent. “This is among the highest in the world. I propose to reduce the highest surcharge rate from 37 percent to 25 percent in the new tax regime. This would result in reduction of the maximum tax rate to 39 percent,” said Sitharaman.

The finance minister also proposed to cap deduction from capital gains on investment in residential house under sections 54 and 54F to Rs 10 crore. Another proposal with similar intent is to limit income tax exemption from proceeds of insurance policies with very high value. The details of these two announcements are awaited.

What Budget 2023 did not give

Though the investors have many demands in terms of reduced rate of taxation of the short-term capital gains on the equities and equity mutual funds to 5 percent as compared to 15 percent, the finance minister did not pay heed to it.

There was also an expectation that the limit of investment allowed under section 80C from Rs 1.5 lakh. However, the same was not revised upwards. The tax deductions available for National Pension Scheme (NPS) too were not revised upwards.

Also annuities continue to get taxed in the hands of the investors, as against the popular demand of offering some solace on that front.

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