In the Union Budget 2023, Finance Minister Nirmala Sitharaman announced relief for the middle class by cutting personal taxes ahead of the Lok Sabha elections in 2024.
"Currently, those with income up to Rs 5 lakh do not pay any income tax in both old and new tax regimes. I propose to increase the rebate limit to Rs 7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to Rs 7 lakh will not have to pay any tax," she said, while also scrapping the old tax regime and introducing the new one.
In the old regime, citizens were taxed 25 per cent without exemptions and 30 per cent with exemptions allowed.
"I had introduced, in the year 2020, the new personal income tax regime with six income slabs starting from Rs 2.5 lakh. I propose to change the tax structure in this regime by reducing the number of slabs to five and increasing the tax exemption limit to Rs 3 lakh," she added.
The old slabs were
Rs 0- 2.5 lakh - No tax
Rs 2.5-5 lakh - 5 per cent tax
Rs 5-7.5 lakh - 10 per cent tax
Rs 7.5-10 lakh - 15 per cent tax
Rs 10-12.5 lakh - 20 per cent tax
Rs 12.5-15 lakh - 25 per cent tax
Rs 15 lakhs and above - 30 per cent tax
The new slabs are
Rs 0-3 lakh - No tax
Rs 3-6 lakh - 5 per cent tax
Rs 6-9 lakh - 10 per cent tax
Rs 9-12 lakh - 15 per cent tax
Rs 12-15 lakh - 20 per cent tax
Rs 15 lakh and above - 30 per cent tax
People can opt for the old tax regime as the new one becomes the default. Former Finance Minister P Chidambaram slammed the move, saying "Besides, making the new tax regime the default option is grossly unfair and will rob the ordinary taxpayer of the meagre social security that he may get under the old tax regime," PTI reported.