Under the new tax regime, taxpayers can take advantage of lower tax rates if they are willing to waive exemptions
The government has now made changes to the Finance Bill 2023 which has given ‘marginal relief’ to taxpayers with annual incomes of just over Rs 7 lakh
Even while the Budget 2023 exempted individuals with incomes up to Rs 7 lakh from income tax, the Finance Bill 2023 has provided further relief to individual taxpayers by providing marginal relief. With this, those with an income in the range of Rs 7,00,001-Rs 7,29,000 are treated on an equal footing with the person with an income up to Rs 7 lakh, hence no tax liability.
The Ministry of Finance explained the provision saying that under the new tax regime effective from April 1, if a taxpayer has an annual income of Rs 7 lakh, he/she will not pay any tax. But if he/she has an income of Rs 7,00,100, he/she pays tax of 25,010.
So an additional income of Rs 100 leads to a tax of Rs 25,010.
Therefore, a marginal exemption is proposed so that the tax one pays should not exceed the income exceeding Rs 7 lakh (Rs 100 in this case), the ministry said.
Nangia Andersen LLP partner Sandeep Jhunjhunwala said the amendment to the Finance Bill aims to provide marginal relief to frontier income individual taxpayers by proposing an income tax deduction payable on differential income above Rs 7 Lakh.
“If you work out the math, a person with an income of up to (approximately) INR 7,27,700 could benefit from this marginal relief,” Jhunjhunwala added.
The 2023-24 budget had announced the tax cut where no tax would be levied on people whose annual income is up to Rs 7 lakh under the new tax regime. The move that experts say was an incentive for self-employed taxpayers to switch to a new tax regime that does not provide exemptions for investments.
Under the new tax regime, taxpayers can take advantage of lower tax rates if they are willing to waive exemptions
Under the revamped new tax regime, no tax would be levied on income up to Rs 3 lakh. Income between Rs 3-6 lakh would be taxed at 5 per cent; Rs 6-9 lakh at 10 per cent, Rs 9-12 lakh at 15 per cent, Rs 12-15 lakh at 20 per cent and income of Rs 15 lakh and above are taxed at 30 per cent. Furthermore, a standard deduction of Rs 50,000 was allowed under the new regime.
Now the government has made changes to the Finance Bill 2023 which has given ‘marginal relief’ to taxpayers with an annual income of just over Rs 7 lakh.
While the government has not specified the threshold income that would qualify for marginal deduction, according to calculations, tax experts said that individual taxpayers with an income of Rs 7,27,777 would benefit from this exemption.
(With input from PTI)
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