This morning, the Union Budget 2023 was presented by Finance Minister Nirmala Sitharaman and introduced several changes to the Indian tax system.
New Income Tax Regime
One of the most notable changes on the budget presented on 1 February 2023 is the new income tax slab system replacing the old tax regime.
In this article, you will get a hold of the new income tax slabs and its differences from the old tax regime.
Also, how it will have the impact on the tax outlay of people in India.
There are Six tax slabs with different tax rates, under the new tax regime as listed below.
|Slab||Rate of Tax|
|Taxable income up to Rs. 3 lakhs||NIL|
|Taxable income between Rs. 3 lakhs to Rs. 6 lakhs||5%|
|Taxable income between Rs. 6 lakhs to Rs. 9 lakhs||10%|
|Taxable income between Rs. 9 lakhs to Rs. 12 lakhs||15%|
|Taxable income between Rs. 12 lakhs to Rs. 15 lakhs||20%|
|Taxable income between Rs. 15 lakhs and above||30%|
Removal Of Several Tax Exemptions and Deductions
It is noteworthy here that the new tax regime eliminates several tax exemptions and deductions including the standard deduction, transportation allowance, and the entertainment allowance.
On the other hand, some exemptions and deductions, such as those for house rent, medical expenses, and charitable donations, remain unchanged.
The major difference between the old tax regime and the new tax regime is that the new regime eliminates many tax exemptions and deductions.
In its defense, the government has promised to compensate for this increase by reducing the tax rates.
A Default Scheme
The other major difference between the old and new tax regimes is that the new regime is a default scheme.
In simple words, now the individuals have the option to choose between the old tax regime and the new tax regime.
if an individual fails to make a choice then they will automatically be considered under the new tax regime.
How Does This Help?
It appears that the government has made the new tax regime a default scheme for several reasons.
For starters, it is to simplify the tax system and make it easier for people to understand.
The other advantage is that this new tax regime eliminates many exemptions and deductions, making it easier for people to calculate their tax liabilities.
With the implementation of this new tax regime, the government hopes that it will increase tax compliance by making the tax system more transparent and straightforward.
How Does This Affect?
When it comes to the impact of the new income tax slabs on the tax outlay of people in India, it will vary depending on several factors, such as their taxable income and the exemptions and deductions they are eligible for.
Interestingly, the government has promised that the new tax regime will reduce the tax burden for the majority of taxpayers.
But, it can not be denied that the new income tax slabs introduced by the Indian government on February 1, 2023, are a big shift from the old tax regime.
The new tax regime has made significant changes to the tax outlay of the Indian people, with the government increasing the basic exemption limit and reducing the tax rate for the middle-income group.
In order to simplify the tax filing process, the government has also made the new tax regime the default scheme.
This new regime also encourages more taxpayers to switch to the new tax regime.
Moreover, the impact of the new tax regime on the tax outlay of the Indian people will depend on their individual circumstances.
This move from the government is most likely to result in a lower tax liability for the majority of taxpayers.