Union Finance Minister Nirmala Sitharman announced in the Union Budget 2023 that the new income tax regime will become the default for all taxpayers beginning from April 1, 2023. Not just that, the FM announced a slew of changes in this year’s budget speech fulfilling a longstanding demand of taxpayers, particularly the salaried class. Among the major changes announced were the increase in the tax rebate limit, changes in income tax slabs, raising the standard deduction limit for senior citizens, higher capital gain taxes under Section 24 of the Income Tax Act and a few more provisions related to winnings from online games, TDS, conversion of Gold to Electronic Gold Receipt.
Sitharaman’s move to make the new income tax regime default doesn’t mean the old income tax regime will be phased out. It simply means a taxpayer will have to opt for the old regime from the default new tax regime.
Let’s discuss these 6 major income tax rule changes in detail:
Income Tax: Tax rebate limit raised
Under the new tax regime, the rebate income is increased from Rs 5 lakh to Rs 7 lakh.
Income Tax: Changes in income tax slabs
FM Sitharaman has introduced new changes in the tax slab.
New tax rates:
- 0-3 lakh – nil
- 3-6 lakh – 5%
- 6-9 lakh- 10%
- 9-12 lakh – 15%
- 12-15 lakh – 20%
- above 15 lakh- 30%
Income Tax: Standard deduction for senior citizens
Under the new regime, senior citizens will have a standard deduction of Rs 50,000 for pensioners as well including family pensioners. Each salaried person with an income of Rs 15.5 lakh or more will benefit by Rs 52,500.
Salaried employees can calculate standard deductions for FY 2023?
Section 16(ia) of the Income Tax Act, 1961 (hereinafter referred to as ‘the IT Act’) provides that every salaried taxpayer could claim a flat deduction of upto Rs. 50,000. Further, even taxpayers deriving pension income would be eligible to claim such standard deduction. The quantum of such deduction would be restricted to lower of the salary/ pension amount or Rs. 50,000.
Also Read :
| Particulars | Taxpayer receiving Salary | Taxpayer receiving Pension |
| Gross Salary/ Pension | 10,00,000 | 7,50,000 |
| Less: Allowances exempt u/s 10 | ||
| House Rent Allowance | (1,20,000) | – |
| Leave Travel Allowance | (80,000) | – |
| Net Salary | 8,00,000 | 7,50,000 |
| Less: Deductions u/s 16 | ||
| Standard Deduction u/s 16(ia) | (50,000) | (50,000) |
| Professional Tax u/s 16(iii) | (2,500) | – |
| Income Taxable under the ‘Salary’ Head | 7,47,500 | 7,00,000 |
