Mrs. Nirmala Sitharaman, the 2nd female in the history of Independent India to deliver the budget speech as the Finance Minister of India. Whereas the last year budget was called as the “Blue print of the Amrit Kaal”, this is the 1st budget in the Amrit Kaal. The introductory part of the budget speech very glaringly set forth the objectives of the government and the journey since 2014. This year’s budget has the 7 priorities and very graciously termed as “Saptarishi” by our finance minister. She said that these priority sectors will be guiding us through the Amrit Kaal.
The major focus of this article is to explain the consequences and implications of the New Tax slabs and what are its direct effect on a common man. The personal tax section in the Part B of the budget is highlighted by our finance minister as the one “primarily benefiting the hard-working middle class”[1]. This segment introduced 5 major announcements and a number of minor comments as well.
1. The first and the foremost being the Rebate under Section 87A. An individual and HUF having net taxable income less than or equal to Rs. 7,00,000, can claim rebate of Rs.25,000 or the amount of tax whichever is lower. But this is available for the people opting the New Tax Regime. The Old Tax Regime will continue to have maximum of Rs. 12,500 rebate for assessee having income up to Rs. 5,00,000. This rebate will definitely benefit the assessee with no tax planning and no exemptions to claim in form of HRA, LTA, etc., no deductions to claim under Section 80C to 80U or to book losses.
2. New tax regime is made as the default regime, this does not mean the rolling out of old tax regime. The old tax slabs, rates and the deductions are still there as a choice to the assessee but at the time of filing of the IT return one will find new tax regime as a default setting. Earlier old tax regime was the default and the new one was available as on option.
3. The basic exemption is increased from Rs. 2. Lakhs to Rs. 3 lakhs and new tax slabs and rates are introduced under New Tax Regime which looks as follows:
| Tax Slabs (in Rs.) | Rates (in %) |
| 0-3 | Nil |
| 3-6 | 5 |
| 6-9 | 10 |
| 9-12 | 15 |
| 12-15 | 20 |
| 15 and above | 30 |
(Applicable only under new tax regime)
4. The standard deductions are allowed in the New Tax Regime, for salaried and pensioners, earlier which was only in the old tax regime. Now the assessee can get a flat deduction, maximum up to Rs. 50,000 under Section 16 of Income Tax Act, 1961 under the new tax regime as well.
5. The highest tax rate of 42.74%, which is one of the highest tax rates in the world is reduced to 39%. The reduction is in the highest surcharge rate from 37% to 25% in the new regime.
6. A major change is made in tax exemption on the leave encashment on retirement of non-government salaried employees. The limit is increased from Rs. 3 lakhs to Rs. 25 lakhs.
7. The government has cleared its view on not considering the conversion of gold into electronic gold receipts and vice versa as transfer. Hence no capital gain is attracted on this. This will ensure investment in electronic goal receipts. The gold that are kept in hard form or jeweller with the people can also be rolled out.
It is very evident from the above highlights that steps are made by the government to make the New Tax Regime more lucrative. But still the majority finds the old tax regime as more beneficial because of the deductions and the exemptions which they can claim. There are quite a few, for them it is one and the same thing to go with any of the above regime. For lower income groups both the regimes can give same results if they have exemptions to claim, losses to write off or expenses made to claim deductions at its maximum. This step in promoting this New Regime will make tax planning a cake walk for lower income groups. Now they don’t have to understand about the deductions, exemptions and the investments in order to reduce their tax liability. Where Albert Einstein said, “The hardest thing in the world is to understand income tax”, today if at all was an assessee in India would have definitely understood Sec.115BCA (New tax regime). Another impact of this new regime is that the cash flow at the disposal of the assessee will increase as the blockage of funds in form of investments in tax saving scheme will reduce.
On the other hand, there will be a substantial increase in the assessee falling under the income slabs of 6 lakhs to Rs. 7 lakhs. Those who were earlier disclosing their income up to Rs. 5lakhs will now very safely fall under the brackets of 6lakhs to 7lakhs. This will humongously reflect improvements in the income levels of the assessee. For the assessee falling under larger income groups, the old regime will be more beneficial with proper tax planning and expenditure. According to EY India, “If the maximum exemptions and deductions claimed by salaried individuals is more than Rs.4.25 lakh for an income above Rs.15.5 lakh, then he/she may pay less tax in the old tax regime from April 1, 2023.”[2]
Section 115BAC of Income Tax Act, 1961 (the new tax regime) clearly was the highlight of this budget. It was introduced back in 2020 but this budget session government have tried it best to promote it. It is way too early to comment, that if it is a hit or a miss but there are way too many hidden reasons for doing the same. Speculations were there, that this year budget would address the problem of unemployment but very less was said in this regard. A lot of capital expenditure is allocated for development which may show effects only in the long run. When elections are around the corner, it is a very safe, smart and a systematic budget to present. It has everything to lure the voters and expenditures in the right direction to show the progress of the nation. Concluding this highlight of the budget 2023 for a common man with the line of Franklin D. Roosevelt: “Taxes are paid in the sweat of every man who labors.”
[1] Budget Speech 2022-23, Speech of Finance Minister
[2] EY India
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quite informative