As the nation eagerly awaits the presentation of the budget on February 1, expectations run high, especially among the employed population.
Given the upcoming elections, the government is set to unveil an interim budget this time, likely steering clear of major announcements.
Nevertheless, the middle class is hopeful for potential income tax relief in the upcoming budget.
Key Highlights of New Tax Regime:
In the previous year’s budget, the central government provided significant relief to taxpayers by introducing a new tax regime.
Under this scheme, individuals earning up to Rs 7 lakh became exempt from paying income tax. The current tax regime presents taxpayers with two options: the new tax slab and the old tax slab.
New Tax Regime Slab:
Under the new tax regime introduced in 2020, the income tax structure is as follows:
Zero tax on income ranging from Rs 0 to 3 lakh
5% tax on income from Rs 3 to 6 lakh
10% tax on income from Rs 6 to 9 lakh
15% tax on income from Rs 9 to 12 lakh
20% tax on income from Rs 12 to 15 lakh
Revisions in 2023:
In response to public feedback and expectations, the government made key changes to the new tax regime in the budget of 2023. Notable adjustments include:
Increase in basic exemption limit from Rs 2.5 lakh to Rs 3 lakh
Expansion of tax exemption along with rebate from Rs 5 lakh to Rs 7 lakh
Introduction of a standard deduction of Rs 50,000
Total tax savings up to Rs 7.5 lakh are now tax-exempt in the new tax regime.
Comparison with Old Tax Regime:
In contrast, the old tax regime continues to offer tax-free income up to Rs 5 lakh.
This regime provides tax exemptions on investments up to Rs 1.5 lakh under Section 80C of the Tax Act.
Additionally, taxpayers in the old tax slab do not incur any tax on income up to Rs 6.5 lakh. For those in the lowest income bracket, no tax is levied on income up to Rs 2.5 lakh in the old tax regime.
