Top 5 Income Tax Changes in 2023 Impacting You in the Current Tax Year

Key Income Tax Changes in Budget 2023 that will Impact your Current Year

In the recently announced Union Budget 2023-24, the government has introduced a series of fresh Income Tax rules, reshaping the personal taxation landscape. These changes, aimed at empowering individuals to retain more of their income, come with a new default tax structure. Let’s explore five key alterations that will impact you in the upcoming tax year.

1. Revised Tax Slabs with Attractive Rates:
To make the new tax regime more appealing, adjustments have been made to the income tax slabs. The revised slabs are as follows:

No tax on income up to Rs 3 lakh
5% for income between Rs 3 lakh and Rs 6 lakh
10% for income from Rs 6 lakh to Rs 9 lakh
15% for income from Rs 9 lakh to Rs 12 lakh
20% for income from Rs 12 lakh to Rs 15 lakh
30% for income exceeding Rs 15 lakh

2. Enhanced Tax Exemption Limit:
In the new tax regime, the tax exemption limit has been raised, allowing individuals to benefit from tax exemption on income up to Rs 3 lakh, an increase from the previous limit of Rs 2.5 lakh. This means an additional Rs 50,000 will be tax-exempt from this year onwards.

3. Default Adoption of New Tax Regime:
The new tax regime has been designated as the default structure. When filing your Income Tax Return (ITR), the system will automatically display the new tax regime. If you prefer the old tax system, you’ll need to manually select it.

4. Increased Tax Rebate Under Section 87A:
Section 87A of the Income Tax Act sees a notable enhancement in the rebate limit within the new tax regime. The rebate limit has been doubled from Rs 12,500 to Rs 25,000, providing additional relief for taxpayers.

In a positive move for employees and pensioners, choosing the new tax regime will now also grant a standard deduction of Rs 50,000. Previously, this deduction was limited to those under the old tax system.

Conclusion:

These changes reflect a significant shift in the government’s approach, putting more control in the hands of taxpayers to make informed financial decisions. As you navigate the intricacies of these new rules, it’s crucial to stay informed and consider consulting a Tax advisor for personalized guidance on optimizing your tax strategy.