The Finance Bill 2023, which was passed by the Lok Sabha on Friday, has provided some relief to taxpayers who choose the new tax regime. Under the amendment, individuals earning slightly above the tax exemption limit of Rs 7 lakh will only be required to pay taxes on the additional income, resulting in a marginal tax payment.
The Finance Ministry has clarified that under the new tax regime effective from April 1, if a taxpayer earns an annual income of Rs 7 lakhs, they will not be required to pay any taxes. However, if their income is Rs 7,00,100, they will have to pay a tax of Rs 25,010. As a result, an additional income of just Rs 100 results in a tax liability of Rs 25,010. To provide marginal relief in such cases, the amendment proposes that the tax payment should not exceed the income that exceeds the Rs 7 lakh limit (i.e., Rs 100 in this case).
Nangia Andersen LLP Partner Sandeep Jhunjhunwala said the amendment to Finance Bill seeks to provide a marginal relief to individual taxpayers having borderline income by proposing a deduction of income tax payable in excess of the differential income above Rs 7 lakh.
“Working out the math, an individual having income up to (approx.) Rs 7,27,700 could stand to benefit from this marginal relief,” Jhunjhunwala added.
The Budget 2023-24 had announced the tax rebate whereby no tax would be levied on those with annual income of up to Rs 7 lakh under the new tax regime. The move which experts felt was a push for salaried class taxpayer to switch to new tax regime where no exemptions on investments is provided.
Under the revamped new tax regime, no tax would be levied for income up to Rs 3 lakh. Income between Rs 3-6 lakh would be taxed at 5%, Rs 6-9 lakh at 10%, Rs 9-12 lakh at 15%, Rs 12-15 lakh at 20% and income of Rs 15 lakh and above will be taxed at 30%.
