On 24 March, the Central government announced a marginal relief for taxpayers opting for the new tax regime.
Under this relief, individuals earning a little higher than the no-tax ceiling of Rs 7 lakh will pay tax only on the differential income.
Amendment to New Tax Regime
The government introduced this amendment in the Finance Bill 2023 which was passed by the Lok Sabha on Friday.
Under this new tax regime which comes into effect from April 1, if a taxpayer has an annual income of Rs 7 lakh they pay no tax, said the Finance Ministry, Explaining the provision.
It is noteworthy here that if the taxpayer has an income of Rs 7,00,100, the tax is 25,010.
So, just an additional income of Rs 100 leads to a tax of Rs 25,010 earlier.
But now, with this amendment, the tax individuals pay should not be more than the income that exceeds Rs 7 lakh (Rs 100 in this case), according to the ministry.
Finance Minister Nirmala Sitharaman announced during the Budget 2023 that no tax would be levied on those with an annual income of up to Rs 7 lakh under the new tax regime.
Marginal Relief To The Taxpayers
According to the experts, the move was intended to compel the salaried class of taxpayers to migrate to a new tax system without investment exemptions.
Under this new tax regime, no tax is levied for income up to Rs 3 lakh, as per the announcement in Budget 2023.
Further, the income between Rs 3-6 lakh is taxed at 5 per cent, Rs 6-9 lakh at 10 per cent, Rs 9-12 lakh at 15 per cent, Rs 12-15 lakh at 20 per cent, and income of Rs 15 lakh and above will be taxed at 30 per cent.
The new tax regime also has a Rs 50,000 standard deduction.
Now, with this new amendment to the Finance Bill 2023, the government has given ‘marginal relief’ to those taxpayers with an annual income of a little over Rs 7 lakh.
So, the Tax experts believe that the individual taxpayers with income of Rs 7,27,777 would benefit from this relief, said a PTI report.
Please note here that the government has not indicated the income threshold that would be eligible for marginal relief so far.
Further, the amendment to the Finance Bill seeks to provide a marginal relief to individual taxpayers having borderline income by proposing a deduction of income tax payable in excess of the differential income above Rs 7 Lakh, said Nangia Andersen LLP Partner Sandeep Jhunjhunwala in a media report.
Further adding, “Working out the math, an individual having income up to (approx.) INR 7,27,700 could stand to benefit from this marginal relief,”.