Budget 2023: Finance Minister unveils income tax relief, a year before elections

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Finance Minister Nirmala Sitharaman on Wednesday while presenting the Budget 2023, announced Income Tax rebate limit increase to Rs 7 lakh from Rs 5 lakh and said that the new tax regime will be the default tax regime.

Sitharaman who presented the last budget of the incumbent Bharatiya Janata Party government announced an increase in the income tax rebate limit from Rs 5 lakh to Rs 7 lakh under the new tax regime.

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She said that the new tax regime will now be the default tax regime which means people earning up to Rs 7 lakh will not have to pay any tax under new tax regime.

The Finance Minister said: "I introduced the new personal income tax regime with 6 income slabs, starting from Rs 2.5 Lakhs in 2020. I propose to change the tax structure in this regime by reducing the number of slabs to 5 and increasing the tax exemption limit to Rs 3 Lakhs."

Under the new tax regime, an individual with income up to Rs 3 lakh will not have to pay any tax while an individual with Rs three to six lakh income will have to pay 5 per cent tax. An individual with an income of above Rs 6 lakh and up to Rs 9 lakh will have to pay a tax of 10 per cent, while an individual with income between Rs 9 lakh to Rs 12 lakh will be taxed at 15 per cent. Individuals with an income of above Rs 12 lakh and up to Rs 15 lakh will be taxed at 20 per cent.

The highest tax rate of 30 per cent will be paid by those whose income is above Rs 15 lakh. An individual with income of rupee 15 lakh will have to pay Rs 1.5 lakh tax down from Rs 1.87 lakh under new tax structure.

An individual with annual income of Rs 9 lakh will have to pay only Rs 45,000.

The government has also proposed to reduce highest surcharge rate from 37 per cent to 25 per cent in new tax regime.

The finance minister in her budget speech said that India will prioritise fiscal deficit reduction, job creation, and economic growth. It was the last budget presented by the government to Parliament before the Lok Sabha elections in 2024.

She said that all sections of the society will gain from strong public finances and a robust financial sector. "The government would aim for a budget deficit of 5.9% of GDP in 2023-24, down from the current fiscal year's 6.4%."

Earlier, while presenting the Budget 2023, the finance minister said that the world has recognised India as a bright star as the country is recording healthy economic growth despite global uncertainties.

India's growth at 7 per cent in the current fiscal is the highest among major economies and the Indian economy is on the right track, she said in her Budget speech.

"The economy is pegged to grow by 7 per cent in FY23 (2022-23) and by 6.5 per cent (6.0-6.8 per cent) in FY24 as the global environment remains rife with uncertainty."