In a much-awaited announcement that is expected to give a huge relief to the middle class of the country, the Union Finance Minister Nirmala Sitharaman on Wednesday while presenting the Union Budget said that anyone earning up to seven lakh rupees a year will not have to pay any taxes, thus increasing the non-taxable income limit from the earlier rupees five lakh to rupees seven lakh from 2023-2024.
“Those with income up to Rs 5 lakh do not pay any income tax in both old and new tax regimes. I propose to increase the rebate limit to Rs 7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to Rs 7 lakh will not have to pay any tax.”
Finance Minister Nirmala Sitharaman announced in the parliament on Wednesday morning, amongst huge cheer from the MPs present in the Lok Sabha. The finance minister announced five major changes in the personal income tax that will come into effect from 2023-2024 financial year. Here is the list of five changes in the personal income tax: The first proposal was related to the rebate on the income tax where those with an annual income of Rs seven lakh and below will be exempted from paying personal income tax to the government.
Secondly, the finance minister proposed to reduce the number of income tax slabs to five from the earlier six slabs and have increased the exemption limit from Rs 2.5 lakh earlier to Rs 3 lakh now. The new income tax slabs have also been made simpler with the slab and percentage of income tax in the multiples of five.
“This will provide major relief to all tax payers in the new regime. An individual with an annual income of Rs 9 lakh will be required to pay only Rs 45,000. This is only 5 per cent of his or her income. It is a reduction of 25 per cent on what he or she is required to pay now, ie, 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 per cent of his or her income, a reduction of 20 per cent from the existing liability of Rs 1,87,500.” The finance minister Nirmala Sitharaman told during the Budget.
The third proposal was announced for the salaried class and the pensioners including family pensioners, where the finance minister proposed to extend the benefit of standard deduction to the new tax regime. “Each salaried person with an income of 15.5 lakh or more will thus stand to benefit by ` 52,500.” The FM said.
The fourth announcement in the personal income tax segment was regarding the reduction in the maximum tax rate, which is currently one of the highest in the world, at 42.74%. The finance minister announced that in the new tax regime this would be reduced to 39% and the surcharge rate has also been reduced from 37% to 25%. The fifth and the last major announcement on personal income tax involved the limit on for tax exemption on leave encashment on retirement of non-government salaried employees.
The limit of ₹3 lakh was last fixed in 2002 during the Atal Bihari Vajapayee government when the highest basic pay in the government was ₹30,000 per month. In line with the increase in government salaries, Sitharaman proposed to increase this limit to ₹25 lakh.
These announcements on the personal income tax sector brought much cheer to the middle class and the salaried class people who for long had been waiting to get this much needed relief. The Daily Guardian spoke to a handful of people from the salaried class who expressed their happiness over the reforms brought out in the direct taxation sector.
Varun Dhody, a financial management consultant working with an MNC in Delhi speaking to The Sunday Guardian said that the this was long overdue and would give much needed relief to lakhs of salaried class people.
