Income Tax No relief: The government has not given any relief in income tax to the common man in the interim budget. If you choose the old tax regime, your income up to Rs 2.5 lakh will still remain tax free. However, under Section 87A of the Income Tax Act, you can save tax on income up to Rs 5 lakh.
On choosing the new tax regime, you will not have to pay tax on income up to Rs 3 lakh like before. In this also, under Section 87A of the Income Tax Act, salaried persons can get tax exemption on income up to Rs 7.5 lakh and others can get tax exemption on income up to Rs 7 lakh.
Understand the old tax regime with an example
According to Bhopal’s CA Karthik Gupta, suppose someone’s annual income is Rs 5 lakh. In the old tax regime, income up to Rs 2.5 lakh is tax free. In such a situation, the person will be liable to pay tax at the rate of 5% on the remaining Rs 2.5 lakh. That means, he will have to pay tax of Rs 12,500. But the government waives this tax under Section 87A of the Income Tax Act.
There is also a screw in it. If your earning is more than Rs 5 lakh by even one rupee, then you will have to pay tax not on one rupee but on Rs 2.5 lakh. Now the tax liability at the rate of 5% on Rs 2.5 lakh will be Rs 12,500. On the remaining Rs 1, tax will have to be paid at the rate of 20%. That means, tax of Rs 12,501 will have to be paid.
Income tax slab under old tax regime
| Earnings (in Rs) | Tax rate |
| Up to 2.5 lakh | 0% |
| 2.5 to 5 lakh | 5% |
| 5 to 10 lakhs | 20% |
| More than 10 lakhs | 30% |
Understand the new tax regime with an example
Suppose, if someone’s annual income is Rs 5 lakh. In the new tax regime, income up to Rs 3 lakh is tax free. In such a situation, the person will be liable to pay tax at the rate of 5% on the remaining Rs 2 lakh. That means, he will have to pay tax of Rs 10,000. But in this regime, the government waives tax on income up to Rs 7.5 lakh under Section 87A.
There is a catch in this also. If you are salaried and your earning is more than Rs 7.5 lakh by even one rupee, then you will have to pay tax not on one rupee but on Rs 4,50,001. Now after waiving off the tax of Rs 3 lakh, out of the remaining Rs 4,50,001, Rs 15,000 will have to be paid at the rate of 5% on Rs 3 lakh and Rs 15,000 at the rate of 10% on the remaining Rs 1,50,001.
That means the total tax liability will be Rs 30,000. Here let us also tell you that people who are not salaried get the benefit of tax deduction only on the amount up to Rs 7 lakh. In the new tax system, salaried people get the separate benefit of standard deduction of Rs 50,000, hence their income up to Rs 7.5 lakh becomes tax free.
Income tax slab under the new tax regime
| Earnings (in Rs) | Tax rate |
| Up to 3 lakhs | 0% |
| 3 to 6 lakhs | 5% |
| 6 to 9 lakhs | 10% |
| 9 to 12 lakhs | 15% |
| 12 to 15 lakhs | 20% |
| More than 15 lakhs | 30% |
Difference between old and new tax regime, new option given in 2020
There are two options for filing income tax return. A new option was given on 1 April 2020. In the new tax slab, the range of tax free income was increased from Rs 2.5 lakh to Rs 3 lakh, but tax deductions were taken away. At the same time, if you choose the old tax slab, you can take advantage of many types of tax deductions.
Deduction of up to Rs 1,50,000 is available under Section 80C of Income Tax Act in the old tax regime. Apart from this, many other types of tax deductions can be availed in the old regime. Another big difference is that in the old regime, after rebate under Section 87A, income up to Rs 5 lakh is tax free, whereas in the new regime, income up to Rs 7.5 lakh becomes tax free.
Income tax exemption increased from Rs 1.80 lakh to Rs 3 lakh in 10 years
Budget 2012-13: Income tax exemption increased from Rs 1.80 lakh to Rs 2 lakh.
Budget 2014-15: Income tax exemption limit increased from Rs 2 lakh to Rs 2.5 lakh.
The limit for senior citizens was increased from Rs 2.5 lakh to Rs 3 lakh.
Budget 2017-18: Income tax rate on income of Rs 2.5 lakh – Rs 5 lakh reduced from 10% to 5%.
Budget 2019-20201: Individuals with annual income up to Rs 5 lakh were given complete exemption from income tax (Section 87A).
Budget 2020-21: This time a new income tax regime was added. After this, the taxpayer was given two options to pay tax. In this, income up to Rs 3 lakh is tax free.
Budget 2023-24: Under the new tax regime, tax rebate has been increased to Rs 7.5 lakh.
These major changes were made regarding tax and investment in Budget 2023
1. The government had increased the rebate to Rs 7 lakh for the new tax regime.
For those choosing the new tax system, the rebate limit has been increased to Rs 7 lakh. Earlier it was Rs 5 lakh. Another relief has been given to the salaried class in the budget. Standard deduction of Rs 50,000 was also included in the new tax system.
2. Investment limit increased in Senior Citizens and Monthly Income Scheme
In the last budget, the government had increased the investment limit in the Senior Citizens Savings Scheme to Rs 30 lakh. Earlier one could invest only a maximum of Rs 15 lakh in this scheme. 8.2% interest is being given annually in this scheme.
At the same time, the investment limit in the Monthly Income Scheme was increased from Rs 4.5 lakh to Rs 9 lakh. The limit for joint account was also increased from Rs 9 lakh to Rs 15 lakh. This scheme is giving 7.4% annual interest.
3. Rs 2 lakh in Mahila Samman Scheme. 7.5% interest on investments up to Rs.
‘Mahila Samman Savings Certificate’ was launched in the budget with an interest rate of 7.5%. In this, women can deposit a maximum of Rs 2 lakh for 2 years. That means, on an investment of Rs 2 lakh, this scheme will yield a profit of Rs 32 thousand in two years.
How much will you get after two years if you invest in MSSC?
| Investment (in Rs.) | How much money will you get in total | How much interest was received (in Rs.) |
| 50 Thousand | 58 Thousand | 8 Thousand |
| 1 Lac | 1 Lakh 16 thousand | 16 Thousand |
| 2 Lakhs | 2 Lakh 32 thousand | 32 Thousand |
Note: This calculation has been done approximately according to the compound interest.
4. Less tax on withdrawing PF without PAN
There was a change in the tax rules regarding withdrawal from Provident Fund (PF). It has been decided to charge 20% TDS instead of 30% during withdrawal if PAN is not linked. The changed rule is benefiting those PF holders whose PAN is not yet updated.
