“The PM was clear that taxpayers should know what they are paying, so make it simple. No immense documents should be required,” said FM Nirmala Sitharaman, speaking exclusively to Rahul Joshi, Group Editor-in-Chief, Network18
Terming the new tax system “better” and “least complicated”, Union Finance Minister Nirmala Sitharaman, speaking exclusively to Rahul Joshi, Group Editor-in-Chief, Network18, two days after she presented Budget 2023-24 in Parliament on February 1, said the government has not set a timeframe for the new regime.
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“I have not given a timeframe…Every Indian should make his or her choice. I would say lower tax rate is better…I would say it will be a better system and least complicated,” she said. “If a taxpayer is left with more money, he/she can decide where to put his/her money. I do not underestimate the taxpayer.”
Elaborating further, Sitharaman said: “The PM was clear that taxpayers should know what they are paying, so make it simple. No immense documents should be required.”
Expressing hope that at least 50% will move to the new tax regime, she said: “Eventually the tax rates must be low. Citizens cannot be burdened, but for that the tax base has to be wider…”
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Commenting on the rich tax deduction, she said, “People have made huge money by selling and buying houses.”
THE NEW TAX REGIME
Sitharaman, in the Union Budget 2023-24, announced an increase in the income tax rebate limit. Now, taxpayers with up to Rs 7 lakh annual income will not be required to pay any tax. Earlier, those who earned up to Rs 5 lakh annually were not liable to pay income tax in both the old and new tax regimes. The rebate limit has been now increased to Rs 7 lakh, but only those who opt for the new tax regime.
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The tax slabs in the new income tax regime have also been reworked in Budget 2023. The Finance Minister has raised the tax exemption limit by Rs 50,000 to Rs 3 lakh while the number of slabs has been reduced to five.
Now, in the new tax regime, income between 0 to Rs 3 lakh will not be taxed. Earlier, income up to Rs 2.5 lakh was not subject to any tax. Income between Rs 3 lakh and Rs 6 lakh will be taxed at 5%, between Rs 9 lakh and Rs 12 lakh at 15%, and the tax rate for income between Rs 12 and Rs 15 is 20%. Income exceeding Rs 15 lakh will not be taxed at 30%.
The Finance Minister also announced that the new tax regime is the default tax regime now and the old tax regime will be available only on request.
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Under Section 87A of the Income Tax Act, the tax rebate was limited to Rs 12,500 for those with an income of Rs 5 lakh. After a taxpayer, who has income up to Rs 5 lakh, claims all deductions under Chapter VIA, his effective net tax liability used to be zero in the old tax regime.
Now, if a taxpayer with Rs 7 lakh annual income opts for the new tax regime, then he will be able to avail of a rebate of Rs 25,000. This means that such taxpayers will not have to pay any income tax.
