India’s hardworking middle class will not have to pay any tax if their annual income is up to Rs 7 lakh, the Union Budget 2023-24 has proposed. This, however, is true if a taxpayer opts for the new tax regime prescribed under Section 115BAC of the Income Tax Act, 1961.
According to the changes proposed in the Union Budget, the basic exemption limit under the new tax regime is hiked to Rs 3 lakh from Rs 2.5 lakh.
“An individual with annual income of Rs 9 lakh will have to pay only Rs 45,000 in tax. And, an individual with income of Rs 15 lakh will have to pay Rs 1.5 lakh tax, down from Rs 1.87 lakh under new tax structure,” finance minister Nirmala Sitharaman said in her Budget Speech.
On the other hand, the Budget has also introduced a provision for standard deduction of Rs 50,000 in new tax regime for salaried and pensioners which was available only under the old tax regime so far.
“I propose to extend the benefit of standard deduction to the new tax regime. Each salaried person with an income of Rs 15.5 lakh or more will thus stand to benefit by Rs 52,500,” Sitharaman said.
What is standard tax deduction?
Introduced in the Union Budget 2018, the standard deduction is offered in lieu of transport allowance and medical reimbursement. In interim budget 2019, the standard deduction limit was increased to Rs 50,000 from Rs 40,000 earlier. Individual taxpayers are not required to submit any bills to the employer to claim the standard deduction. (informations only)
New tax regime is the default option
Taxpayers have the option to stick with the old tax regime, finance minister (FM) Nirmala Sitharaman said while presenting the Budget in the Lok Sabha on February 1, 2023. The new tax regime remains the default option, she added. This means that from April 1, 2023, taxpayers who want to opt for the old tax regime have to separately choose it at the beginning of the financial year.
The Budget 2023-24 has also reduced the number of tax slabs under the new tax regime to 5 from the previous 6.
Budget 2023-24: Tax slab under new tax regime
| Income | New tax regime slab |
| Up to Rs 3 lakh | Nil |
| From Rs 3 lakh to Rs 6 lakh | 5% |
| From Rs 6 lakhs to Rs 9 lakh | 10% |
| From Rs 9 lakh to Rs 12 lakh | 15% |
| From Rs 12 lakhs to Rs 15 lakh | 20% |
| Above Rs 15 lakh | 30% |
| Source: Budget 2023-24 |
“The revised tax slabs under the new tax regime and the extension of the standard deduction will ensure that the salaries class will have a little more cash in hand this coming year to fuel consumption and or investments in India,” (informations only)