Union Budget 2023: Income tax rebate limit increased from Rs. 5 Lakh to Rs. 7 Lakh

Finance Minister Nirmala Sitharaman on Wednesday unveiled the new Union Budget for the year 2023.

Alongside other major changes, the Finance Minister detailed significant changes to Income Tax under the new tax regime.

Under the newly unveiled taxation provisions, the limit for individual taxpayers has been increased from Rs. 5 lakhs to Rs. 7 lakhs a year.

“Currently, those with income up to ₹ 5 lakh do not pay any income tax in both old and new tax regimes. I propose to increase the rebate limit to ₹ 7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to ₹ 7 lakh will not have to pay any tax,” FM Sitharaman stated to the Parliament on Wednesday.

The previously proposed twin-structure system unveiled in 2020 was also discontinued in the 2023 Union budget. The twin-structure system taxed individuals 25% without exemptions and 30% with exemptions.

New slabs for taxation under income tax were also detailed in the parliament on Wednesday.

Speaking of the change in tax slabs, the Finance Minister stated, “I had introduced, in the year 2020, the new personal income tax regime with six income slabs starting from ₹ 2.5 lakh. I propose to change the tax structure in this regime by reducing the number of slabs to five and increasing the tax exemption limit to ₹ 3 lakh.”

The new slabs are as follows:

1. Rs 0-3 lakh – no tax

2. Rs 3-6 lakh – taxed at 5 per cent

3. Rs 6-9 lakh – taxed at 10 per cent

4. Rs 9-12 lakh – taxed at 15 per cent

5. Rs 12-15 lakh- taxed at 20 per cent

6. Above ₹ 15 lakh – taxed at 30 per cent