Changes in Personal Income Tax - Budget 2023

 It is now proposed that the New Tax Regime introduced in Finance Act 2020 will serve as the default tax regime. It is applicable to Individuals and HUFs. Additionally, this regime would take over as the default regime for AJP, BOI, and AOP (other than cooperative). Any Individual, HUF, AOP (other than a cooperative), BOI, or AJP may choose to be taxed under the old system if they do not want to be taxed under the new tax regime.

Tax rates under new tax regime

Total Income	Tax Rate
Upto Rs. 3 Lakhs	NIL
From 3 Lakhs to 6 Lakhs	5%
From 6 Lakhs to 9 Lakhs	10%
From 9 Lakhs to 12 Lakhs	15%
From 12 Lakhs to 15 Lakhs	20%
Above 15 Lakhs	30%

 

Tax rates under old tax regime

Total Income	Tax Rate
Upto Rs. 2.5 Lakhs	NIL
From 2.5 Lakhs to 5 Lakhs	5%
From 5 Lakhs to 10 Lakhs	20%
Above 10 Lakhs	30%

 

Enhancement of Rebate

Residents with total annual incomes up to Rs. 5,00,000 are now eligible for the tax rebate under section 87A under the old and new regimes. It is proposed to raise this rebate to Rs. 7,00,000 for assesses under the new tax regime.

Standard Deduction

Standard deductions of Rs. 50,000 for salaried individuals and family pensions of Rs. 15,000 are now only permitted under the Old Tax Regime. These two deductions would also be permitted under the new tax regime system.

Surcharge: The maximum surcharge rate is reduced to 25% from 37% for those who opt for new tax regime. No change in surcharge is proposed for those who opt to be under the old regime.

Leave Encashment: The exemption threshold increased from Rs. 3 Lakhs to Rs. 25 Lakhs.