In its 2023 Budget, FM Sitharaman has focused on making this tax regime more attractive
Finance Minister Nirmala Sitharaman has focused in her Budget 2023 on making this tax regime more attractive
New income tax regime 2023: Finance Minister Nirmala Sitharaman has focused in her Budget 2023 on making this tax regime more attractive. With effect from the 2020-21 financial year, the simplified personal income tax regime or the New Tax Regime (NTR) has been introduced. While tax rates were lower under this regime, no exemptions and deductions were provided, except for a deduction for employer contributions to NPR.
Budget 2023 proposes to make the following deductions available to eligible persons under the new tax regime from April 1, 2023:
Divya Baweja, Partner, Deloitte India. said: “As expected, the FM has proposed several changes to the new tax regime to make it more popular. Of the 5 major personal income tax announcements made, three proposals have been made for middle-class individuals opting for the new tax regime, namely: – Increase of the Section 87A deduction for people with taxable income earn up to Rs 7 lakhs, change in tax bracket rates and introduction of standard deduction and family pension deduction, making the new tax regime all the more lucrative.”
Introduction of standard deduction of Rs 50,000
This is a positive move by the government to extend the benefit of the standard deduction to the new tax regime, with the aim of encouraging wage earners to opt for the new tax regime.
This deduction can be requested without submitting a document to the employer. An employer automatically takes the standard deduction into account when calculating the wage tax. If you are a family pensioner, you can claim a standard deduction of Rs 15,000 under the new tax regime. The income of a family pensioner is taxed under the heading ‘Income from other sources’.
In her budget speech, FM Sitharaman said, “Standard deduction of Rs 50,000 to wage earners, and deduction of family pension up to Rs 15,000, is currently only allowed under the old regime. It is proposed that these two deductions should also be allowed under the new regime.”
NPS contribution by employer
If your employer contributes to your NPS account, as a salaried employee you are eligible for a gross income contribution deduction. This deduction is claimed under section 80CCD(2) of the Income-tax Act, 1961.
Contributions from Agniveer to Agniveer Corpus Fund
Finance Minister Nirmala Sitharaman has announced that any amount paid or deposited to the Agniveer Corpus Fund under the newly proposed Section 80CCH of the Income-tax Act can be claimed as a deduction from income by the Agniveer.
According to the budget speech, “The payment received from the Agniveer Corpus Fund by the Agniveer enrolled in Agnipath Scheme, 2022 is proposed to be tax exempt. It is proposed to allow deductions in the calculation of total income to the Agniveer from the contribution made by him or the Central Government to his Seva Nidhi account.”
According to the budget note, “It is further proposed that a new section 80CCH be inserted into the law to provide that an assessed person who is enrolled in the Agnipath scheme and subscribes to the Agniveer Corpus on or after November 1 Fund, 2022, may deduct the amount paid by him in full, as well as the amount that has been paid by the government into his account in the Agniveer Corpus Fund, from his total income.”
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