The budget announced by the Finance Minister in 2023 had a few major changes overall in the realm of personal finance management. The key changes discussed in this article are those pertaining to the tax slabs in the new income tax regime.
The Union Budget presented by the Finance Minister Nirmala Sitharaman made a couple of major updates to the tax slab structure. For one, the New Tax Regime will be the default tax slab structure for all salaried employees from 1 April 2023. You will have to specifically opt for the Old Regime if you prefer that over the new one.
Here are the tax slabs presented in Budget 2023 and their limits:
In addition to the tax slab revisions, the rebate limit on tax was increased from ₹5 to ₹7 lakh in the new regime. What this means is that if your income is less than ₹7 lakh then you don’t have to pay any tax.
The new tax regime proposed in 2023 allows a standard deduction of ₹50,000 to salaried professionals. So someone with an income of ₹7.5 lakh can claim a standard deduction of ₹50K and bring the taxable income down to ₹7 lakh. This makes them eligible to pay no tax as per the revised new tax regime.
The new regime does not allow you to claim tax exemptions on your income through instruments like ELSS mutual funds or NPS because the revised new tax regime of 2023 already saves you a lot of tax under the consolidated slabs.
This entirely depends on your annual income and deductions. For instance, if you’re someone who gets between ₹12-15 lakh per year, in the Old Regime you will fall under the 30% tax bracket. But in the new regime, you come under the 20% bracket. Another key difference is that in the old regime you have the option of making savings that exempt a part of your income from tax, such as Sections 80CCE and 80CCD of the Income Tax Act. Overall, if you’re making more than ₹10 lakh per annum, you could consider the new regime.
The new tax regime might work better for those who make more than ₹10 lakh per year. In the old regime, anyone making over ₹10 lakh will be taxed at 30%. So, this depends on your income as well as the amount you stand to save on tax through the regime you choose.
This depends on how much you make annually, and also how much you stand to save on tax through either regime. Generally speaking, if your salary is more than ₹10-₹11 lakh per year, the new tax regime will save you more taxes. Here’s some quick back-of-the-napkin math you can do: Let’s say you make ₹12 lakh per year. Your tax is ₹1.17 lakh in the old regime, considering a standard deduction of ₹50,000 and and additional deduction of ₹1,50,000 under 80c. In the new regime, your tax outgo stands at ₹85,800. Even if you max out the exemptions under the old tax regime, the new tax regime will suit you better.
The new regime works great for those making more than ₹10-₹11 lakh a year. But if your income is less than that, you may have to pay more in the new regime than the old. This is because you can offset this taxable income by investing in tax saving schemes such as the PPF, NPS, or the various other instruments under the different sections of the Income Tax Act - if you choose the old regime.
