Breaking Down India's Union Budget 2023: New Tax Slabs Impacting Salaried Employees

The Union Budget of 2023 was one of the most significant events in the financial calendar of India, and individuals and businesses across the country keenly awaited it. In Union budgets, the government lays out its fiscal policies and plans for the upcoming financial year, which can significantly impact the economy and individual finances. One of the critical areas of interest for taxpayers is the tax slabs and rates, as they directly affect their disposable income and savings.

In the Union Budget 2023, presented on February 1, 2023, the Indian government introduced new tax slabs for salaried taxpayers to provide relief to the middle class and increase progressivity in the tax system. The new slabs were presented to reduce the tax burden on the lower and middle-income groups and incentivize spending and investment. Overall, the changes made in the tax structure in the Union Budget 2023 were considered a mixed bag by taxpayers and financial experts alike. While some welcomed the move to provide relief to the middle class, others felt that the government could have further rationalized the tax structure.

This article discusses the major highlights of India’s Union Budget 2023, the different tax slabs for salaried employees, and how the tax slabs affect salaried employees in India.

In her Budget Speech for 2023, Finance Minister Nirmala Sitharaman made several proposals for the benefit of taxpayers in both the lowest and highest tax rates. According to FM's proposal, anyone making up to Rs 7 lakh under the New Regime will not be subject to taxation. The Finance Minister has proposed that under the new tax system, the highest surcharge rate for people in the highest tax band be lowered from 37% to 25%. This proposal would lower the maximum tax rate to 39% for taxpayers in the highest tax bracket. The FM also unveiled several proposals to benefit those on salaries, the elderly, and pensioners.

Income Tax Budget 2023 Highlights

The Union Budget of the year 2023, presented by Finance Minister Nirmala Sitharaman, brought some significant changes to the income tax structure in India. The new income tax regime has introduced several measures to provide relief to the middle-class and lower-income groups.

The first significant change is the basic tax exemption limit hike from Rs 2.5 lakh to Rs 3 lakh, providing tax relief to those earning up to Rs 3 lakh per annum. Additionally, the rebate under section 87A is increased from 5 lakh to 7 lakh, which means that individuals earning a sum up to Rs 7 lakh per year will not be required to pay any tax.

According to The Economic Times, the income tax slabs have also been restructured under the new income tax regime. Individuals earning between Rs 3 lakh and Rs 6 lakh will now be required to pay a 5% tax, while those earning between Rs 6 lakh and Rs 9 lakh will have to pay a 10% tax. Those earning between Rs 9 lakh and Rs 12 lakh will be required to pay a 15% tax, while those earning between Rs 12 lakh and Rs 15 lakh will now pay a 20% tax. For individuals earning above Rs 15 lakh per annum, the tax rate will be 30%.

The changes in the income tax slabs are expected to provide significant relief to the middle-class and lower-income groups while also increasing progressivity in the tax system. The new tax regime introduced a standard deduction for salaried taxpayers and pensioners. The new tax regime has reduced the highest surcharge rate from 37% to 25%.

In Budget 2023, Sitharaman announced that companies must possess a Permanent Account Number (PAN), which will be a universal identification for all digital systems of specified government agencies.

Overall, the Union Budget 2023 provides significant relief to the middle-class and lower-income groups while also introducing several measures to encourage savings and investment. The changes in the income tax regime are expected to increase progressivity in the tax system, which is a welcome move. The reduction in the highest surcharge rate is also likely to incentivize investment in the country.

New Tax Slabs for Salaried Taxpayers

According to Financial Express, The Union Budget 2023 proposed new tax slabs for salaried taxpayers, which will be applicable from Assessment Year (AY) 2024-25. Salaried employees can file their Income Tax Returns (ITR) under the Old Tax Regime or the New Tax Regime. Both options will be available for the upcoming AY 2023-24, with the last date of filing being July 31, 2023.

For AY 2023-24 or Financial Year (FY) 2022-23, the applicable tax slabs and rates for salaried persons will be the same as the previous year. The changes proposed by Finance Minister Nirmala Sitharaman in Budget 2023, such as an increased basic exemption limit and rebate under section 87A, will be applicable from AY 2024-25.

It is vital for salaried taxpayers to carefully assess their income and choose the tax regime that suits them best. While the New Tax Regime offers lower tax rates, it does not allow for certain deductions and exemptions under the Old Tax Regime. Salaried employees should evaluate their tax liability under both regimes before making a decision. The availability of both options provides flexibility for taxpayers to choose the regime that is more beneficial to them.

How Tax Slab Changes Affect the Salaried Employees in India?

The changes in the tax slabs can significantly impact the tax liability of salaried employees in India. The increase in the basic exemption limit from Rs 2.5 lakh to Rs 3 lakh and the hike in rebate under section 87A from Rs 5 lakh to Rs 7 lakh in the latest tax regime can help reduce the tax burden for many salaried taxpayers.

However, those earning above Rs 15 lakh will be subject to a higher tax rate of 30% under the new tax regime, which may increase their tax liability. The standard deduction for salaried taxpayers, pensioners, and family pensioners may provide some relief.

It is important to note that salaried employees can choose between the old and the new tax regime based on their individual tax situation. This choice can impact their tax liability significantly. It is recommended to consult a tax expert or use online tax calculators to determine the best tax regime to choose from.

Overall, the changes in the tax slabs can provide some relief to salaried employees in India, but the impact may vary depending on the individual's income and tax deductions.

Streamline your tax compliance with TeamNest.

TeamNest can help companies deal with tax slab changes by automatically updating the tax calculation in the payroll software. It can easily integrate with the company's existing accounting software and simplify payroll by calculating taxes based on the new tax slab rates. This ensures that employees' salaries are accurately calculated and tax deductions are made according to the latest tax laws. TeamNest can also generate automated reports on tax calculations and ensure compliance with tax regulations. Additionally, it can help employees understand how their taxes are being calculated and provide transparency in the process. With TeamNest, companies can reduce tax compliance errors, save time, and increase efficiency in dealing with tax slab changes. Talk with TeamNest’s HR Expert @ +91 913-786-6322 or email at sales@teamnest.com.