Sources have informed Times Now that the Narendra Modi government is considering increasing the exemption limit in the new tax regime in its upcoming budget. The proposed raise would see the tax exemption limit under the new tax regime go up to Rs 5 lakh from the current Rs 3 lakh. The intention behind this move is to stimulate consumption by providing tax relief.
A source mentioned, “This is part of the move to incentivise the new tax regime.” The increase in the tax exemption limit is expected to result in more disposable income for individuals, thereby encouraging consumption.
New Tax Regime:
- Up to Rs 3 lakh – Nil
- Between Rs 3 lakh and Rs 6 lakh – 5% (Tax rebate u/s 87A)
- Between Rs 6 lakh and Rs 9 lakh – 10% (Tax rebate u/s 87A up to Rs 7 lakh)
- Between Rs 9 lakh and Rs 12 lakh – 15%
- Between Rs 12 lakh and Rs 15 lakh – 20%
- Above Rs 15 lakh – 30%
Increasing the tax exemption to Rs 5 lakh from the current Rs 3 lakh in the upcoming budget would reduce the number of tax slabs from six to five. Taxpayers with income between Rs 5 lakh and Rs 9 lakh would receive a tax rebate under section 87A, provided the other slabs remain unchanged and attract the same tax rates.
This change is expected to decrease the tax liability by Rs 10,400 (including a 4% Health and Education cess) for individuals earning between Rs 7.6 lakh to Rs 50 lakh annually. Taxpayers in the income bracket of Rs 50 lakh to Rs 1 crore are anticipated to save Rs 11,440 (including cess and a 10% surcharge).
