During her union budget 2023 speech on 01st February, 2023 Honorable Finance Minister Smt. Nirmala Sitharaman Ji has proposed to extend the benefit of standard deduction in the new income tax regime for salaried class.
Section 16 of the Income Tax Act, 1961, Standard deduction:
As per the provisions of section 16 (ia) there is a standard deduction of Rs. 50000 (the amount of the salary, whichever is less) has been provided. It may be noted that such deduction is only available to a tax payer opting old income tax regime. It is proposed to allow standard deduction of Rs. 50000 under the new income tax regime also.
Pre Budget-
Standard Deduction of Rs. 50000 is only available to a tax payer opting old income tax regime. No such deduction is available to a tax payer opting new income tax regime.
Post Budget-
- Standard Deduction of Rs. 50000 is available to a tax payer opting old income tax regime.
- Standard Deduction of Rs. 50000 is available to a tax payer opting new income tax regime.
Let’s understand with help of an example, its impact on tax liability of a salaried individual. Suppose such salaried individual having gross salary of Rs. 1550000, his tax liability will be Rs. 202500 and Rs. 150000 as per New Income Tax Regime (Pre Budget) and New Income Tax Regime (Post Budget) respectively, kindly refer following computation:
| Sl. No. | New Income Tax Regime (Pre Budget) | New Income Tax Regime (Post Budget) | |||||
| Total Income (Rs.) | Tax Rate | Tax Amount (Rs.) | Total Income (Rs.) | Tax Rate | Tax Amount (Rs.) | ||
| 1 | 0-250000 | Nil | Nil | 0-300000 | Nil | Nil | |
| 2 | 250001-500000 | 5% | 12500 | 300001-600000 | 5% | 15000 | |
| 3 | 500001-750000 | 10% | 25000 | 600001-900000 | 10% | 30000 | |
| 4 | 750001-1000000 | 15% | 37500 | 900001-1200000 | 15% | 45000 | |
| 5 | 1000001-1250000 | 20% | 50000 | 1200001-1500000 | 20% | 60000 | |
| 6 | 1250001-1500000 | 25% | 62500 | More than 1500000 | 30% | ||
| 7 | More than 1500000 | 30% | |||||
COMPUTATION OF TOTAL INCOME AS PER NEW INCOME TAX REGIME (PRE BUDGET)
| SALARIES | 1550000 | |
| GROSS SALARY | 1550000 | |
| GROSS TOTAL INCOME | 1550000 | |
| TOTAL INCOME | 1550000 | |
| TOTAL INCOME ROUNDED OFF U/S 288A | 1550000 | |
COMPUTATION OF TAX ON TOTAL INCOME
| TAX ON RS. 250000 | NIL | |
| TAX ON RS. 250000 (500000-250000) @ 5% | 12500 | |
| TAX ON RS. 250000 (750000-500000) @ 10% | 25000 | |
| TAX ON RS. 250000 (1000000-750000) @ 15% | 37500 | |
| TAX ON RS. 250000 (1250000-1000000) @ 20% | 50000 | |
| TAX ON RS. 250000 (1500000-1250000) @ 25% | 62500 | |
| TAX ON RS. 50000 (1550000-1500000) @ 30% | 15000 | |
| TAX ON RS. 1550000 (A) | 202500 |
COMPUTATION OF TOTAL INCOME AS PER NEW INCOME TAX REGIME (POST BUDGET)
| SALARIES | 1500000 | |
| GROSS SALARY | 1550000 | |
| LESS: STANDARD DEDUCTION U/S 16(ia) | 50000 | |
| TAXABLE SALARY | 1500000 | |
| GROSS TOTAL INCOME | 1500000 | |
| TOTAL INCOME | 1500000 | |
| TOTAL INCOME ROUNDED OFF U/S 288A | 1500000 | |
COMPUTATION OF TAX ON TOTAL INCOME
| TAX ON RS. 300000 | NIL | |
| TAX ON RS. 300000 (600000-300000) @ 5% | 15000 | |
| TAX ON RS. 300000 (900000-600000) @ 10% | 30000 | |
| TAX ON RS. 300000 (1200000-900000) @ 15%
TAX ON RS. 300000 (1500000-1200000) @ 20% |
45000
60000 |
|
| TAX ON RS. 1500000 (B) | 150000 | |
After comparison of above two computation A and B, it can be said that salaried person with an income of Rs. 15.50 lakhs or more will thus stand to benefit by Rs. 52500.
Disclaimer: The content mentioned in this article is based on my personal views and the same can not be taken as legal opinion or otherwise.
Author Bio
Some websites are showing differences in Std
regular pay and Pensioners by 50k to 15K
is it false hearing between fifteen and fifty?