New Income Tax Rule Introduced in Budget 2023!

what happened in budget 2023

The budget 2023 turned out to be a populist one, as it had something for every income group. Let’s unveil a few tax changes which will make you happy as a taxpayer.

What’s Happening?

As we know, this is the last budget before the general elections, and it has turned out to be an actual populist budget. The budget had something for every income group, including the lower-income, middle class and wealthy.

In the Union Budget 2023, the Finance Minister Nirmala Sitharaman, unveiled a few tax changes which have bought relief to the taxpayers. 

Quick Rundown Into The New Income Tax Rules

Change in Tax Rebate

Earlier, individuals who earned up to Rs 5 lakhs did not have to pay any income tax under both regimes. But, in Union Budget 2023, the limit is raised to Rs 7 lakhs under the new tax regime. Simply put, you don’t have to pay any tax if you earn below or up to Rs 7 lakhs.

Change in Income Tax Slabs

Under the new tax regime, there are now only five tax slabs. Moreover, the budget has been favourable towards taxpayers and has increased the basic tax exemption limit under the new tax regime from Rs 2.5 lakhs to Rs 3 lakhs.

You would be confused that, the Finance Minister stated that if you earn below Rs 7 lakhs, then you don’t have to pay taxes. But, on the other hand, if you earn above Rs 3 lakhs, you have to pay 5% in taxes. 

So the equation is such that if your income exceeds Rs 7 lakhs, then you will have to pay taxes as per the tax slab. 

For example, if your income is Rs 9 lakhs, here is how it will get taxed. 

You don’t have to pay taxes for the first three lakhs (Rs 0 to Rs 3 lakhs tax slab). For the next three lakhs (Rs 3-6 lakh slab), you will have to pay 5% on Rs 3 lakhs, which comes to Rs 15,000. For the last Rs 3 lakhs (Rs 6 to 9 lakhs slab), you will be taxed 10%, which comes to Rs 30,000. 

So, you will have to pay Rs 45,000 in taxes. 

Now, even if you have income up to Rs 7 lakhs, you still have to pay taxes, and you will receive a rebate from the government. 

This is indeed a major relief for taxpayers. Here is a chart explaining the amount you would save after the implementation of new tax slabs. 

Enhanced Joy to Individuals From Highest Tax Slab

If you are a salaried person with an income of Rs 15.5 lakhs or above, you will benefit by Rs 52,500 under the new tax regime. 

Ultra-Rich Will Have a Gala Time

According to the Finance Minister, if an individual earns above Rs 5 crores per annum, they pay a tax of 42.74% which is the highest in the world. Hence, the budget has highlighted this section and reduced the surcharge from 37% to 25% in the new tax regime. 

So this will reduce the maximum tax rate to 39% .

The Default New Tax Regime

The new income tax regime will be the default tax regime, but citizens can continue to opt for the old tax regime if they wish to. 

That sums up all the changes regarding taxes announced in the budget 2023. 

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