Budget Highlights 2023-24 for Salaried Employees

Budget Highlights 2023-24 for Salaried Employees: The Union Budget 2023-24 aims to provide tax benefits to the hard-working salaried class by making numerous changes to tax rates impacting taxpayers at the lowest and the highest tax rates, under the new tax regime. This regime was introduced in 2020 and provides lower tax rates to taxpayers who do not avail of any exemptions or deductions. It is now being made the default tax regime unless the taxpayer chooses to be governed under the old regime.

Further Simplifying Personal Income Tax

Two years ago, the government introduced a new personal tax regime and taxpayers could choose between the old and new regime. Ms. Sitharaman announced that the new regime unveiled this year would now become the default. She added that tax-payers would though still be able to request for the old tax structure, which allows for exemptions as the new regime has no scope for exemptions, though it has a higher tax-free ceiling of ₹ 7 lacks.

1. The income limit for a rebate of income tax increased from ₹5 lakhs to 7 lakhs in the new regime
2. The highest surcharge rate on income above 5 crores is to be reduced from 37% to 25% under the new regime
3. Extending benefits of the standard deduction to the new tax regime for salaried class and pensioners
4. Increasing tax exemption limit to ₹25 lakh on leave encashment on retirement for non-government salaried employees.

Taking cognizance of the fact that India is one of the countries where tax rates are amongst the highest in the world, the Budget has, in addition to changes to the tax slabs, proposed to reduce the maximum rate of surcharge from 37% to 25% (under the new tax regime), thereby, bringing the maximum marginal rate of taxation down to 39% from 42.74% for the country’s highest taxpayers having taxable income of more than Rs. 5 crores.

Changes in the Standard Deduction

1. The benefit of standard deduction has been extended to the salaried class and the pensioners including family pensioners under the new tax regime.
2. Salaried individuals will get a standard deduction of Rs 50,000 and pensioners Rs 15,000 as per the proposal. Each salaried person with an income of Rs 15.5 lakh or more will thus gain Rs 52,500, from the above proposals.

The Budget seems to attract and enhance the common taxpayers’ sentiments by providing numerous tax benefits. However, one needs to be mindful that these benefits are only available to taxpayers who do not choose to file the tax return under the old tax regime. The tax slabs and rates under the old tax regime remain the same.