As per Budget 2023 exactly how much income tax do you have to pay now?

Giving some relief to the Indian middle class, Union Finance Minister Nirmala Sitharaman has announced to increase the tax exemption limit to Rs 3 lakh and the rebate limit from Rs 5 lakh to Rs 7 lakh under the new tax regime.

• First up, take a look at the new tax slabs announced in Budget 2023:

The new tax regime will now be the default tax regime, Nirmala Sitharaman said during her budget speech on Wednesday, February 1.

I read all 58 pages of Budget 2023 summary and tried to explain it in memes for Gen-Z

The new income tax rates are:

• Up to Rs 3 lakh: No tax
• Rs 3-6 lakh: 5% tax
• Rs 6-9 lakh: 10% tax
• Rs 9-12 lakh: 15% tax
• Rs 12-15 lakh: 20% tax
• Above 15 lakh: 30% tax

What it means: So, under the new tax regime, if you earn up to Rs 7 lakh a year, you will have to pay NO TAX.

Budget 2023: What you need to know

• If you earn Rs 9 lakh a year, you will have to pay Rs 45,000 as tax as per the new income tax slab.

• If you earn Rs 15 lakh a year, you will have to pay Rs 1.5 lakh as income tax, as per the new tax regime.

What the FM said: "I introduced in 2020, the new personal income tax regime with 6 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 5 and increasing the tax exemption limit to Rs 3 lakh," she said.

 

Reduction in tax: 

• For the first 3 lakh, you will have to pay Rs 15k (5%, Rs 3-6 lakh),
• for the next 3 lakh you will have to pay Rs 30k (10%, Rs 6-9 lakh).
• A person earning Rs 9 lakh a year will now be paying just Rs 45,000 instead of Rs 60,000 currently.
• Similarly, a person earning Rs 15 lakh will now pay only 10% of this as tax. If you earn Rs 15 lakh a year, you have to pay Rs 1.5 lakh.

Budget Day Sarees of Nirmala Sitharaman

"The highest tax rate in our country is 42.74%, it is among the highest in the world. I propose to reduce the highest surcharge rate from 37% to 25% in the new tax regime. This will result in the reduction of the maximum tax rate to 39%," the FM said.

So, what were the old income tax slabs?

• Income below Rs 2.5 lakh: Not eligible for any income tax deduction
• Rs 2.5 lakh to Rs 5 lakh: 5% tax on income that is more than Rs 2.5 lakh.
• Rs 5 lakh to Rs 7 lakh: 15% tax
• Rs 7.5 lakh to Rs 10 lakh: 20% tax 
• Above Rs 10 lakh: 30% tax.

Tax queries answered:

Q: How much tax rebate we have now?

A: Rs 7 lakh per year from Rs 5 lakh per year

Q: What's the catch?

A: Enhanced rebate is only under the new regime.

Q: Do I pay nil income tax under the new regime?

A: Yes

Q: What if I earn more than Rs 7 lakh/year?

A: The FM has cut tax rates in 6 new slabs:
3-6 lakh - 5%
6-9 lakh - 10%
9-12 lakh - 15%
12-15 lakh - 20%
15 lakh and above - 30%