Income tax is levied on taxpayers on the basis of a slab system.
In Budget 2023, the announcement regarding the income tax slabs and rates is one of the key watch out for; experts expect some income tax relief this year
Income Tax Rates and Slabs: Even as the Budget 2023 is around the corner and is set to be presented by Finance Minister Nirmala Sitharaman on Wednesday, February 1, the announcement regarding the income tax slabs and rates is one of the key watch out for. Experts expect some income tax relief this year. Currently, the income tax is exempt for individuals on an annual income of up to Rs 2.5 lakh, while it can be tax-free up to Rs 5 lakh under the new tax regime using rebate under Section 87A. Here’s the comparison of the current income tax rates and slabs under the new regime and the old regime.
Currently, there are two income tax regimes. Individuals can use any one of these. Under the old regime, the income tax is exempt up to Rs 2.5 lakh, and over and above this, various deductions can be claimed under Section 80C, 80D, 80CCD, etc, to reduce taxable income.
Under the new income tax regime, which was introduced in the Budget 2021-22, no income tax is levied on an annual income of up to Rs 5 lakh, without any deductions. However, if the annual income exceeds Rs 5 lakh, let’s say if it becomes Rs 5.5 lakh, income tax on the whole Rs 3 lakh is levied (income up to Rs 2.5 lakh is exempt under both regimes). No deductions can be claimed under the new regime.
Income Tax Expectations In Budget 2023
There is an expectation that the government might give a relief to individual taxpayers by raising tax exemption or rebate limit. There are also demands of raising the deductions limit under Section 80C in the Union Budget 2023-23, compared with Rs 1.5 lakh currently.
Archit Gupta, founder and CEO of Clear, said, “We are expecting the Budget 2023 to benefit the common man. With rising costs of goods and services, it is hoped that the finance minister will find a way to allow relief to the small taxpayer. This could be done by increasing the standard deduction or raising Section 80C limits under the Income Tax Act, 1961.”
Existing Income Tax Slabs and Rates Under Old Regime Vs New Regime:
Annual Income (in Rs) — Old Regime — New Regime
- up to Rs 2,50,000 — Nil — Nil
- 2,50,000-5,00,000 — 5% — 5%
- 5,00,000-7,50,000 — 20% — 10%
- 7,50,000-10,00,000 — 20% — 15%
- 10,00,000-12,50,000 — 30% — 20%
- 12,50,000-15,00,000 — 30% — 25%
- Above 15,00,000 — 30% — 30%.
Clear’s Archit Gupta added that the government may also consider offering those who have lost their jobs some tax relief on compensation received. As well as tax benefits must be considered for working women, giving Nari Shakti is an idea close to the PM Narendra Modi’s heart. “It would be interesting to see some tax benefits for women.
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