Nirmala Sitharaman, the union finance minister, announced five significant modifications to personal income tax on Wednesday, which will be a big relief to middle-class and salaried individuals. The country’s “hard-working middle class,” according to Sitharaman, who presented the Union Budget of FY 2023–2024, will principally benefit from the personal income tax measures.
According to Sitharaman, the new income taxation system will now be the standard tax system. However, citizens will still be able to choose to benefit from the previous tax system.
Here are 5 Important announcements
- The first suggestion dealt with the personal income tax rebate. Both the old & new tax systems exempt anyone with income under Rs. 5 lakh from paying any income tax. Sitharaman suggested increasing this refund cap in the new taxation system to Rs. 7 lakh. Therefore, she explained, “those in the new tax system with earnings up to 7 lakhs will not be required to pay any tax.”
- In 2020, Sitharaman unveiled a new system of personal income taxation with six income taxes brackets beginning at 2.5 lakh. She is now advocating for a five-slab system with a three-lakh rupee tax exemption threshold.
- For the salaried class and pensioners, including family pensioners, was the third plan. She suggested bringing the benefit of the standard deduction into the new tax system. According to the minister, “any salaried person with a salary of 15.5 lakh rupees or more will so stand to benefit by 52,500 rupees.”
- The highest marginal tax rate, which is presently 42.74%, was the subject of her fourth suggestion for the personal income tax. In the new tax system, Sitharaman suggested lowering the maximum surcharge rates from 37% to 25%. According to her, the suggested modification would lower the top tax rate to 39%.
- The cap on the tax deduction on leave encashment after retirement for paid non-government workers was the fifth and final significant pronouncement regarding personal income tax. The 3 lakh ceiling was last set in 2002 when Atal Bihari Vajpayee was the prime minister and the highest monthly basic pay was 30,000. Sitharman suggested raising this cap to 25 lakhs in order to keep up with increases in government wages.
