In what has become a big breather for the salaried class people across the country, the Union Budget has made a huge overhaul in the income tax slab, which in a way would give a significant push to the Centre at a high time when the ruling BJP regime is beefing up its campaign for the 2024 Lok Sabha polls. As it is the last full budget for the Modi administration ahead of the polls, it naturally has drawn a pile of expectations from people of all walks of life.
On Wednesday, Union Finance Minister Nirmala Sitharaman has tabled her fifth budget in the Parliament and in short time into her presentation, she took everyone by surprise by announcing major changes in the income tax slab and as per the new announcements, the rebate limit has been increased for those with incomes of up to Rs 7 lakh under the new tax regime, while the existing limit stands at Rs 5 lakh. This means that people who earn less than Rs 7 lakh taxable income per year won't have to pay any income tax.
This big jump of rebate has become the talk of the nation as a major section of people were expecting a relief in the direct income tax, amid growing inflation and unemployment at a high time when the middle-class people are reviving their life and savings after the Covid pandemic. As it is the last full budget before the first general elections that will be held after the Covid and lockdowns, the rejig in the individual income tax slab was strongly expected by the masses.
According to the budget, for those earning above Rs 7 lakh, the new tax regime will impose the tax on the income at 0% between Rs 0 and 3 lakh, 5% between Rs 3 and 6 lakh, 10% between Rs 6 and 9 lakh, 15% between Rs 9 lakh and 12 lakh, 20% between Rs 12 lakh and Rs 15 lakh. If they earn above Rs 15 lakh, a 30% of tax will be imposed on them. While the new income tax regime has become default tax regime, the taxpayers can also opt the benefit of the old tax regime, under which the income under Rs 5 lakh would be taxed 0%, Rs 5 to 7.5 lakh at 15%, Rs 7.5 to 10 lakh at 20%, and 30% tax for the income above Rs 10 lakh.
Nirmala Sitharaman has also announced that the number of tax slabs will be reduced from six to five. She said, "This will provide major relief to all taxpayers in the new regime. An individual with an annual income of Rs 9 lakh will be required to pay only Rs 45,000. This is only 5% of his or her income. It is a reduction of 25% on what he or she is required to pay now, that is Rs 60,000." She highlighted that India has the highest income tax rate for those in the highest bracket and she proposed to reduce the highest surcharge rate from 37% to 25% in the new tax regime.
The Finance Minister has also announced a new one-time small savings scheme for women, which has been named 'Mahila Samman Savings Certificate'. This scheme will be for two years up to March 2025 and it will provide women with a deposit facility of up to Rs 2 lakh in their name for two years at fixed interest rate of 7.5%. According to reports, this latest relief of 'No Income Tax up to Rs 7 lakh' will be applicable only for those who opt for the new tax regime, which in some cases pushed the people to have more tax burden as it has no usual exemptions on insurance premium, mutual funds, and other such investments while these benefits exist in the old tax regime.