Budget 2023: Understanding Income Tax Slabs

How new tax slabs affect the salaried class?
Finance minister Nirmala Sitharaman has announced 2 major tax amendments for the salaried class.

1. Income limit for rebate of income tax increased from Rs. 5 lakhs to Rs. 7 lakhs in the new regime. So, an individual need not pay income tax if his/her income is below Rs 7 lakhs under new tax regime only.

What is new tax regime?

Under new tax regime, a salaried individual’s tax is calculated flat on their Salary income without any tax exemptions and deductions such as HRA, Housing loan interest, Life Insurance premiums, Children Tuition fee, Tax saving FDs under section 80C deductions and medical insurance premiums under section 80D and other deductions under chapter VIA of Income tax Act, 1961.
What if my income is above Rs 7 lakhs under new tax regime?
If you are opting new tax regime and income is above Rs. 7 lakhs then your income tax shall be calculated after Rs. 3 lakhs as per the new tax slabs.
 
2. Tax Exemption limit increased from 2.5L to 3L and change in tax slabs under new tax regime. However, there is no change in the slabs of old tax regime. Let’s have a look at the comparison of old tax regime vs new tax regime (existing) vs new tax regime (proposed).

Which tax regime is tax beneficial?
It depends upon your income and the total deductions you claim. The new regime introduced in budget 2023 offers minimal exemptions but lower tax rates compared to the older tax regime which continues to co-exist.

The article is authored by T Shashikanth, CFO, Sakshi Media Group