Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman in her Union Budget Speech shared a number of major announcements that will provide substantial benefits to the salaried taxpayers of the country. To attract the growing middle-class section, the Finance Minister announced changes pertaining to rebate, current tax structure and an extension of benefit of standard deduction, among other things. The latest Union Budget also announced several technological measures in order to smoothen the taxpaying process for the salaried class. Let us look at the top seven Budget 2023 updates salaried taxpayers need know about:
1) The Finance Minister proposed an increase in the rebate limit to Rs 7 lakh in the new tax regime which was previously at Rs 5 lakh. This would mean that with the new tax regime in place, individuals with income of Rs 7 lakh will no longer have to pay any tax. Currently, those with income up to Rs 5 lakh do not pay any income tax in both old and new tax regimes.
2) Announcing more sops for middle-class individuals, the Finance Minister proposed change in the tax structure in the new personal income tax regime by reducing the number of slabs to five while also increasing the tax exemption limit to Rs 3 lakh. This means that an individual with an “annual income of Rs 9 lakh will now be required to pay only Rs 45,000, which this is only 5 per cent of his or her income.” This is a reduction of 25 per cent on what he or she is required to pay now, which is Rs 60,000. Similarly, an individual earning an income of Rs 15 lakh would be required to pay only Rs 1.5 lakh or 10 per cent of his or her income, compared to the previous payment of Rs 1,87,500. This is a reduction of 20 per cent from the existing liability.
3) Another major relief, meant for the salaried class as well as the pensioners including family pensioners, is the proposal to extend the benefit of standard deduction to the new tax regime. “Each salaried person with an income of Rs 15.5 lakh or more will thus stand to benefit by Rs 52,500/-. At present, standard deduction of Rs. 50,000/- to salaried individuals and deduction from family pension up to Rs. 15,000/- is currently allowed only under the old regime,” she said.
4) Personal income tax space will witness another major development with the proposal to reduce the highest surcharge rate from 37 per cent to 25 per cent in the new tax regime for those earning income above Rs 2 crore. It is important to note that this would result in reduction of the maximum tax rate to 39 per cent from the present 42.74 per cent, incidentally, this is among the highest in the world.
5) The budget has additionally proposed extension of limit of tax exemption on leave encashment to Rs 25 lakh on retirement of non-government salaried employees which is in line with the government salaried class. Currently, the maximum amount which can be exempted is Rs 3 lakh. While the budget proposed to make the new income tax regime as the default tax regime, as per the announcement, taxpayers have been permitted to continue to “have the option to avail the benefit of the old tax regime.”
6) To further improve services for the taxpayers, the Finance Minister announced the introduction of next-generation common income tax return form. “The rolling out of a next-generation Common IT Return Form and strengthening of grievance redressal mechanism to further improve taxpayers services,” Sitharaman said.
7) The Finance Minister announced the simplification of know your customer (KYC) process, proposing that the KYC process will be simplified adopting a ‘risk-based’ instead of ‘one size fits all’ approach, while additionally noting expansion in “the scope of documents available in DigiLocker for individuals.”
