Union Budget 2023: What to Expect from New Income Tax Regime? Explained
As we begin a new year, we have lofty expectations and hopes for the government. We Indians are eager to find out what the government has in store for us in the upcoming Union Budget 2023. Whether you are a salaried employee or an industry shareholder, you will undoubtedly want to know how the new tax regime in Budget 2023 will benefit you.
About The New Tax Regime
This year, Indian taxpayers can take advantage of the new tax regime slabs that will be implemented at the start of the financial year 2023. But there’s sad news: You won’t get to claim any exemptions or deductions.
The latest tax regime features a unique set of new tax slabs for Indian citizens depending on factors like income, gender, age, etc. It is expected that, like the current scenario, the taxpayers will get to choose any of the tax regime slabs of their choice in the upcoming financial year.
Overview of Union Budget 2023
The central government is expected to make some major modifications to the tax slabs of the old tax regime to introduce new regime tax slabs with increased threshold limits for people with high tax income (ranging between INR 10 lakh – INR 20 lakh). Source: Deloitte India.
It is also anticipated that the Indian Government may lower the tax rate from 30% to introduce a new income tax slab rate of around 25%. In a report, Deloitte India said that the current threshold limit of INR 1,50,000 for investments under Section 80C is too low.
Given the rising inflation and living expenses, it is fair enough for the government to consider increasing the limit. It will benefit the taxpayers in two ways. They will be inclined towards savings and will get the advantage of a much-reduced tax outgo.
Thus, they can easily meet the surging price of multiple commodities with an increased disposable income. Now, let’s take an idea from a detailed report released by EY India to comprehend what we can exactly expect from the Union Budget 2022–23 in detail.
Detailed Insight on What to Expect:
As per the report from EY, the concessional new income tax regime slabs will be made more reasonable and attractive for taxpayers in the Union Budget 2023. EY says that our respected Finance Minister Nirmala Sitharaman may achieve that in the following ways:
- EY predicts the Government will introduce a new tax regime with revised and new tax slabs that will go a maximum of INR 5 lakh without any tax. Furthermore, unlike before, when the 30% income tax slab rate was applicable for income above INR 15 lakh will now change. The tax slab will now be applicable for income above INR 20 lakh.
Here is a table representing a better overview of the proposed changes:
| Expected Concessional Income Tax Regime 2023 | |
| Income (In INR) | Tax Slab Rate |
| Up to INR 5 Lakh | Nil |
| INR 5 Lakh – INR 7.5 Lakh | 7.5% |
| INR 7.5 Lakh – INR 10 Lakh | 12.5% |
| INR 10 Lakh – INR 12.5 Lakh | 17.5% |
| INR 12.5 Lakh – INR 15 Lakh | 22.5% |
| INR 15 Lakh – INR 20 Lakh | 27.5% |
| More than INR 20 Lakh | 30.0% |
Source: Fortune India: Business News, Strategy, Finance and Corporate Insight
- The new tax regime in the Union Budget 2023 is expected to permit a standard deduction valued at INR 50,000.
- Section 80C/CCC/CCD/D benefit should be available for up to INR 2.5 Lakh. Nevertheless, this benefit should be limited to Mediclaim insurance (currently covered by section 80D), employees / self-contribution to new pension scheme {currently covered by section 80CCD(1)/(1B)}, pension policies (currently covered by Section 80CCC), interest on housing loans (currently covered by Section 80C), qualifying life insurance products, and provident funds (including PPF).
Based on the EY report, you can say that Section 80 C’s scope is vast and extensive and comprises a range of expenditures, savings, insurance, etc. Under the concessional tax regime, it can be reduced on housing loan interest, qualifying life insurance products, and PPF/PF.
Final Thoughts
Let’s conclude what needs to be done by considering the past budget. The removal of all deductions, including the standard deduction, made the new tax structure unpopular.
When the tax deduction, provident fund contributions, and house rental allowance were removed from the new tax regime, which was intended to benefit regular employees, fewer people chose to opt for it. It is important to keep these three basic deductions in mind.