5 Key Changes on Income Tax – Budget 2023-24 is released. Nirmala Sitharaman, the union finance minister, and her team have done a very good job and tried to make the common man happy. In her budget speech, 5 major income tax-related changes are announced. These changes will directly give relief to middle-class and salaried individuals. Let’s take a look at 5 Key changes on Income Tax 2023-24.
Budget 2023-24 – 5 Key Changes on Income Tax
#1 Income Tax Limit
Change in Income tax limit and slab is the first thing to consider. Earlier under the personal income category Income up to Rs 5 lakh was exempted from income tax under both the old and new tax regimes. In the new tax regime, the income tax limit is changed to a maximum to Rs 7 lakh. This means the rebate limit in the new tax regime is Rs 7 lakh. Thus, persons in the new tax regime, with income up to Rs 7 lakh will not have to pay any tax.
#2 New Income Tax Slab 2023-24
The new Income Tax Slab introduction is a second change made in Budget 2023-24. You must have noticed that a new simplified tax regime was introduced in the year 2020 where the income tax slab was starting at Rs 2.5 lakh.
In budget 2023-24 new default tax regime is introduced with an income tax slab starting from 3 Lakh. Earlier tax slab was 6 now it is reduced to 5 and the new tax structure or Income Tax Slab from FY 2023-24 onwards is given below.
a) Rs 0 to Rs 3 lakh – 0% tax
b) Rs 3 to 6 lakh – 5% tax
c) Rs 6 to 9 lakh – 10% tax
d) Rs 9 lakh to Rs 12 lakh – 15% tax
e) Rs 12 lakh to Rs 15 lakh – 20% tax
f) Above Rs 15 lakh above – 30% tax
#3 Standard Deduction
A standard deduction of Rs 50000 is extended for the new tax regime. This standard deduction is available only for salaried and pensioners including family pensioners. Each salaried person with an income of Rs 15.5 lakh or more will thus stand to benefit by Rs 52,500.
The new tax regime becomes more attractive due to the introduction of a standard deduction of Rs 50000 to salaried and pensioners.
#4 Tax Surcharge Reduction
The highest Tax surcharge applicable on the individual is reduced from 37% to 25%. This means the maximum tax rate on the highest income slab with income above 5 crore which is 42.744% is reduced to 39%.
However, this reduction of surcharge will only be applied under the new tax regime as no change in surcharge is proposed for those who opt to be under the old regime.
#5 Tax Exemption Leave Encashment
The limit on leave encashment of non-government salaried employees was Rs 3 lakh which was introduced in 2002, under the Atal Bihari Vajpayee administration, when the highest monthly basic pay was Rs 30,000. This limit is proposed to be enhanced to Rs. 25 lakh to keep up with increases in government pay.
