No Income Tax Up to Rs 7 lakh? What other changes were there in Budget 2023 for You? Let’s find out!

Budget 2023: How Does it Affect You?

Union Finance Minister Nirmala Sitharaman recently presented the last full union budget of her tenure before the general elections of 2024. With heightened expectations from the industry and common citizens alike, did the budget deliver? Let’s take an example of Ramesh, an IT professional in Bangalore with an annual income of Rs 20 lakhs and how the Budget 2023 will affect him.

Budget 2023: No income tax up to Rs 7 lakh?  

The Finance Minister announced a tax rebate up to Rs 7 lakh under the new tax regime.

So, Ramesh now has to pay tax on only Rs 17 lakh instead of Rs 17.5 lakh previously, if he is covered under the new regime. This will leave more disposable income in his hands which will raise his spending power.

Budget 2023: New Tax Regime is the Default System  

The new Income Tax regime has now been designated as the default tax regime. Although, citizens will have the option of opting for the old regime.

Thus, if Ramesh does not opt for a specific tax regime, he will be covered under the new tax regime by default. However, he does have the option to opt for the old tax regime.

Budget 2023: Tax Exemption on Leave Encashment Raised  

The Finance Minister also announced that the tax exemption on the leave encashment for non-government salaried employees has been raised to Rs 25 lakh from Rs 3 lakh.

This means at the time of retirement, Ramesh’s leave encashment will be taxed from above Rs 25 lakh, up from Rs 3 lakh earlier.

Budget 2023: Change in the Income Tax Slabs Under the New Regime  

The Income Tax slabs under the new regime have been changed. Under the new regime, the basic exemption limit has been increased from Rs 2.5 lakh to Rs 3 lakh.

Thus, the new income tax slab will leave more disposable income in the hands of Ramesh again. 

New Income Tax Slab and Rates Under the New Regime

Budget 2023: Standard Deduction for Individuals Having Income Above Rs 15.5 lakh  

The Finance Minister announced that individuals having annual income of Rs 15.5 lakh or more, will be eligible for a standard deduction of Rs 52,500, up from Rs 50,000.

So, now, Ramesh will get a standard deduction of Rs 52,500 instead of Rs 50,000 from earlier. Consequently, Ramesh’s disposable income will receive a boost and he can spend more on goods and services.

Budget 2023: What Became Costlier and Cheaper after Budget 2023?

This post is for general information purpose and is no way to be considered as an advice, or recommendation for investment or otherwise. Investment in securities are subject to market risk, please read all related documents carefully before investing. The numbers are on estimate basis only. Percentages are commonly rounded.