Explained: Did Sitharaman juggle numbers somewhere? income tax announcement in budget 2023 has gimmick even rs 10 lakh income can be made fully tax free know how
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Many knowledgeable figures are calling the announcement of Finance Minister Sitharaman regarding income tax a juggling act. They say that a person can stay out of the income tax net even if he has an income of more than Rs 10 lakh with a little cleverness. In the old system of income tax, there are such exemptions and deductions that can be done using this. In such a situation, if you are considering the old system useless after listening to the budget announcement, then you need to think. Let us understand this whole matter with an example.
you will understand everything
Let us assume that your salary is Rs.10 lakh. 20,000 is also interest income of Rs. First of all, a standard deduction of Rs 50,000 is available for the salaried class. This will reduce the taxable income to Rs 9.7 lakh (10,20,000- 50,000). Then comes tax saving investments under section 80C. Due to this, the taxable income can be reduced by Rs 1.5 lakh. And Rs 50,000 is deductible by making investments under section 80CCD(1B). These two deductions combined will reduce your taxable income to Rs 7.7 lakh. Home loan deduction will further reduce some taxable income. If you live in a rented house, you can claim exemption for HRA.
Let us assume that the home loan or HRA reduces the taxable income by another Rs 2 lakh. With this, your taxable income reaches Rs 5.7 lakh. Medical insurance has come into focus post Covid. If your age is less than Rs 60 lakh, then you can claim a deduction of up to Rs 25,000 on health insurance premium. For senior citizen parents, a further deduction of up to Rs 50,000 can be claimed by paying health insurance premium. Given the rising cost of insurance for senior citizens, this limit will be easily crossed. If both the deductions are claimed, the taxable income comes down to Rs 4.95 lakh. This limit is important. If the taxable income is less than Rs 5 lakh, then full tax rebate is available anyway like section 87A. In other words, you do not need to pay any tax.
Different income tax slabs for married and unmarried … When this announcement was made in the budget
Now do you know what the Finance Minister has done?
The Finance Minister has proposed to make the new system of non-exempt income tax ‘default’. ‘Default’ means that if you do not choose the option while filing income tax return, you will automatically go to the new regime. Under the budget proposal, there will be no tax on income up to Rs 7 lakh in the new system. There is no change in the old tax system. That is, there will be zero tax on income of Rs 2.5 lakh. Income between Rs 2.5 lakh and Rs 5 lakh will be taxed at 5 per cent, income between Rs 5 lakh and Rs 10 lakh at 20 per cent and income above Rs 10 lakh at 30 per cent.
In the new system of income tax, there will be no tax on income up to three lakh rupees under the income tax slab. At the same time, 5 per cent on Rs 3 lakh to Rs 6 lakh, 10 per cent on Rs 6 to 9 lakh, 15 per cent on Rs 9 lakh to Rs 12 lakh and 20 per cent on Rs 12 lakh to Rs 15 lakh and above Rs 15 lakh. Income will be taxed at 30 per cent.
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