Union Budget 2023: Glance at personal tax planning
It's been more than a week since the budget was announced. Our finance minister made the statement that “Currently, those with income up to 5 lakhs do not pay any income tax in both old and new tax regimes. I propose to increase the rebate limit to 7 lakhs…” The ministers in the house of parliament cheered. But then she said, “in the new tax regime.”
Now, what is the new tax regime? How is it gonna affect you? Let us understand it by comparing the old and new schemes.
Under the old one, one could claim tax exemptions and deductions — you got a standard deduction of ₹50,000. You could deduct a part of your house rent under House Rent Allowance and then pay tax on what’s left of your income. You could also deduct ₹1.5 lakhs under 80C for investment in FDs, PPF,NSC and ₹25,000 under 80D for medical insurance, etc..
But under the new scheme, there were no such deductions available to you. Due to this taxpayers found the new scheme less lucrative as compared to the old one.
After so many backlashes and non participation under new scheme, Government made changes by updating the tax rate as follows
Apart from this, the government introduced the following benefits to the public under the new scheme
● One would not fall under new scheme slabs if your income is below 7 Lakhs.
● Standard deduction of ₹50,000 which earlier was only given under the old scheme.
So in simple words, If you earn less than ₹7 lakhs, you will not fall under any slab and will be completely exempt from paying income tax. But if you earn more than ₹7 lakhs, say ₹7.5 lakhs, then you’ll have to pay 5% on your income between ₹3 lakh to ₹6 lakh, and 10% between ₹6 lakh and ₹7.5 lakh.
Now which scheme is beneficial depends upon you. If you prefer to plan your future with savings, insurance, and other investments then the old scheme is perfectly suited for you.
However, if you have enough liquid cash and securities for your contingencies you may go for a new scheme regime.
P.s: You can calculate your income tax by visiting: Income Tax Calculator
By: Archit Maheshwari
Student-Shaheed Bhagat Singh College(DU)