Union Budget 2023: Income tax exemption up to Rs. 7 lakh

• ByStartupStory     |    February 1, 2023

In the new tax regime, there would be no income tax on earnings up to Rs 7 lakh, stated Union Finance Minister Nirmala Sitharaman in the Union Budget 2023 on Wednesday. “The government proposes to increase the income tax rebate limit from ₹5 lakh to ₹7 lakh in the new tax regime,” said Sitharaman.

In addition, the finance minister proposed increasing the tax exemption on leave encashment on retirement of non-government salaried personnel to 25 lakh from 3 lakh. 

Tax slabs have been revised under the new tax regime: 

Nil income between 0 and 3 lakh rupees. 

Income over 3 lakh and up to 5 lakh will be taxed at 5%. 

Income beyond 6 lakh and up to 9 lakh would be taxed at 10% under the new regime. 

Income over 12 lakh and up to 15 lakh will be taxed at 20%. 

Income beyond Rs 15 lakh will be taxed at 30%.

According to the finance minister, the new income tax regime would be the default tax regime, with citizens having the choice to remain in the old regime as well.

An individual with a yearly income of 9 lakh will pay 45,000 tax, which is 5% of the salary – a drop of 15,000 from the current 60,000. 

Sitharaman’s recent comments about understanding the “pressures of the middle class” fueled speculation that she would put money back into taxpayers’ pockets. 

According to the finance minister, India would prioritize economic growth and job creation while reducing the fiscal deficit. It was the government’s final comprehensive budget before the 2024 Lok Sabha election.

She stated that the goal is to have solid public finances and a healthy financial sector for the benefit of all segments of society. 

According to Sitharaman, the government would aim for a budget deficit of 5.9 percent of GDP in 2023/24, up from 6.4 percent in the current fiscal year.

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