The Union Budget of India for 2023 was presented on February 1, 2023, by the Finance Minister. The budget focuses on enhancing infrastructure, increasing investment in the healthcare sector, promoting digitalization, and addressing issues in the agriculture sector.

The major highlights of the budget include:

  • Allocation of INR 5.54 lakh crore for the education sector and INR 2.23 lakh crore for the health sector.
  • INR 1.41 lakh crore allocated for the agriculture sector, with a focus on improving farmers’ income and providing them with access to markets.
  • Investment of INR 1.97 lakh crore for the development of infrastructure, including roads, airports, and ports.
  • Introduction of measures to promote digital transactions and encourage the use of technology in various sectors.
  • Reduction of corporate tax for domestic companies to 25% for companies with a turnover of up to INR 2 crore.

The Union Budget 2023 has proposed a tax rebate for individuals with taxable income up to INR 5 lakh. The rebate will be available under Section 87A of the Income Tax Act, and will reduce the tax liability of eligible individuals by INR 12,500. This means that individuals with taxable income up to INR 5 lakh will not have to pay any income tax.

It is important to note that this rebate is only applicable for individual taxpayers and not for Hindu Undivided Families (HUFs), firms, or any other type of taxpayer. Additionally, the rebate is only available for tax assessed for the financial year 2023-2024 and is subject to changes in future budgets.

The new Indian income tax regime, proposed by the Finance Minister Nirmala Sitharaman, includes a tax exemption limit of ₹7 lakh and five tax slabs with a revised rate structure. The first slab of ₹3 lakh has no tax levied, while the rest are levied at 5%, 10%, 15%, 20% and 30% for the respective income ranges. The FM also proposed a reduction of the surcharge rate from 37% to 25% on the highest tax rate, leading to a maximum rate of 39%. The standard deduction benefit has also been extended to the new regime and citizens will have the option to choose between the old and new regimes. The old regime had a tax rebate of ₹5 lakh and six tax slabs, while the new regime is considered to be more beneficial without any deduction claims.

The Indian tax regime has recently undergone a change, leading to higher savings for taxpayers. As per the new tax laws, if your annual salary is ₹ 7 lakh, you are exempt from paying any taxes. This is a significant increase from the earlier rebate of ₹ 5 lakh.

Let’s take an example of a taxpayer earning ₹ 9 lakh per year. The salary is divided into different slabs for taxation purposes. The first slab, which is ₹ 0-3 lakh, is exempt from tax. This is an increase from the earlier exemption limit of ₹ 0-2.5 lakh. The balance of ₹ 6 lakh is taxed at two different slabs – 5% for the ₹ 3-6 lakh portion and 10% for the ₹ 6-9 lakh portion.

As a result, the taxpayer pays a total of ₹ 45,000 in taxes, which is a saving of 25% compared to the previous tax slabs (0-2.5 lakh exempt and ₹ 5 lakh rebate). This serves as a clear demonstration of how the new tax regime is leading to more savings for taxpayers.

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