BUDGET 2023: THIS IS HOW MUCH TAX YOU CAN SAVE UNDER NEW TAX REGIME
BUDGET 2023: THIS IS HOW MUCH TAX YOU CAN SAVE UNDER NEW TAX REGIME
Maintaining consistency in the foundation laid in previous Budgets, the FinMin has announced various measures to make the New Tax Regime (NTR) seem more tax beneficial to individual taxpayers as compared to the existing/Old Tax Regime (OTR).
From FY 2023-24, it is proposed to make the NTR the default tax regime for individual taxpayers. This a significant change for individuals who wish to be taxed under the OTR to claim deductions/exemptions for House Rent Allowance, Leave Travel Allowance, housing loan repayments, etc. Hence, it is crucial to make an informed decision between the two tax regimes i.e. OTR vs proposed NTR.
The amendments in the proposed NTR could result in tax savings (OTR vs NTR) as below:
-The basic exemption limit under the proposed NTR has been enhanced by ₹50,000. Hence, taxable income up to ₹300,000 would not be chargeable to tax under the NTR. This would result in tax savings of ₹2,500.
The income-slabs are proposed to be changed under the NTR. Currently, the slabs change by ₹2,50,000 per slab and are now proposed to change by ₹3,00,000 per slab under the proposed NTR. While the incremental tax was ₹75,000 i.e., OTR-NTR; the incremental tax under the proposed NTR would be reduced by 50% to ₹37,500 i.e., OTR-proposed NTR.
-Rebate under Section 87A of the Income-tax Act, 1961 is available to resident individuals only whereby for taxable income up to ₹5,00,000 individuals are not required to pay tax under OTR and NTR. However, to make the NTR a preferred option, the Budget proposes to extend the rebate for taxable income up to ₹7,00,000 under the NTR only. The comparative tax savings owing to such amendment (i.e., OTR-NTR vs OTR-proposed NTR) would be to the tune of ₹32,500 as compared to the earlier savings of ₹20,000.
The surcharge rate for taxable income above ₹5 crores is proposed to be reduced to 25% from 37%. Hence, surcharge for taxable incomes above ₹2 crores would be capped at 25%. This brings down the maximum marginal tax rate for an individual earning taxable income (excluding capital gains) of more than ₹5 crores to 39% (i.e. 30% tax rate + 25% surcharge + 4% cess) from the existing 42.744%. This could result in tax savings of ₹11,23,200 for high income-earners.
Taxpayers need to note that the option to choose between the OTR and the NTR (for taxpayers not having income from business and profession) could be done every year.
Source: Livemint