The government is not happy with the response to the new tax regime applicable to individual taxpayers. To ensure that more and more taxpayers are covered under the new tax regime, the government has proposed certain provisions in the budget to be presented on February 1, 2023. Let us discuss the proposed measures.
Proposes to include more categories of taxpayers
Earlier the new tax regime option was available only to individuals and Hindu Undivided Families (HUFs) who are residents of India. The Finance Minister has also proposed to make the new tax regime available to all persons who are taxed at the same slab rates. So now an Association of Persons (AOP) (other than a co-operative society), or a body of individuals (BOI) and certain artificial juridical persons will also be eligible to avail the option of being taxed under the new tax regime or the old tax regime. Administration. It is interesting to note that the new tax regime will now be a default option and you will have to actively exercise the option to be taxed under the old tax regime.
Higher eligibility criteria for exemption under section 87A
The Finance Minister has proposed that under the new tax regime, an individual will get a rebate of Rs. 25,000/- under section 87A if his total income during the year does not exceed seven lakh rupees. However, for those who opt for the old tax regime, the limit to be eligible to claim exemption under section 87A has been kept at Rs.5 lakh. Since a person who does not have any business income can opt for any scheme every year, he will opt for the new tax regime only if it provides him with lower tax overall. The increased threshold limit will be hugely beneficial to all self-employed people who have already exercised the option to be taxed under the new tax regime.
Higher basic exemption limit for those opting for new tax regime as against old tax regime
To make the new tax regime attractive, the Finance Minister has proposed a minimum amount of Rs 3 lakh, against which no tax will be payable, as against Rs 2,50,000 for those opting for the old tax regime. So effectively the basic exemption limit has gone up to fifty thousand rupees for all those who opt for the new tax regime.
Change in tax slab for new tax regime
The current new tax regime provides for five tax slabs starting from Rs 2.50 lakh to an income of Rs 2.50 lakh to Rs 15 lakh. The slab tax rates for each of these slabs are 5%, 10%, 15%, 20% and 25%. Income above 15 lakhs is taxed at 30%. Now the Finance Minister has proposed four slabs for the new tax regime. The new tax slab starts from 3 lakhs and increases from 3 lakhs to 15 lakhs. The respective slab rates are 5%, 10%, 15% and 20%. Under the proposed new tax regime, income above Rs 15 lakh is also taxed at a flat rate of 30%.
Standard deduction for salaried individuals and allowance for profession tax
Currently, under the new tax regime, you are not entitled to claim standard deduction against your salary/pension income which was available under the old regime. The Finance Minister has proposed to remove this discrimination and make this deduction available under the new tax regime as well.
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