Income Tax Calculation 2023: The new tax regime was made the default tax regime. At the same time, the old i.e. Old Tax Regime was made optional. Making some changes in the new tax regime, tax exemption was given on additional earnings.
Income Tax Calculation 2023: Income tax season has started. Tax has to be paid on the earnings of the last financial year between April and July. Income tax return will be filled for this. But, some changes were made in the budget 2023. In this, the new tax regime was made the default tax regime.
At the same time, the old i.e. Old Tax Regime was made optional. Making some changes in the new tax regime, tax exemption was given on additional earnings. Standard deduction was also added for the first time. Now the question is, how much tax will you have to pay this time and which regime is more beneficial?
How much income was made tax free?
When the Finance Minister gave information on personal tax during the budget speech, he made income tax-free up to Rs 7 lakh in the new tax regime. Earlier this limit was 5 lakh rupees. The confusion is that if the income of Rs 7 lakh is made tax free, then how much tax will have to be paid by those earning Rs 7.5 lakh.
The solution to the confusion was also here. The government increased the tax rebate limit from Rs 5 lakh to Rs 7 lakh and also gave a standard deduction of Rs 50,000. In this way, the total income up to Rs 7.5 lakh became tax free.
Which tax regime is beneficial to choose?
According to tax expert Ved Jain, if your annual income is Rs 7.5 lakh, then you will not have to pay a single rupee tax. But, this benefit will be available only when the new tax regime has been chosen. For easy understanding, we take the income of Rs 7.5 lakh in both the regimes.
New tax regime
- Total annual income: Rs 7.5 lakh
- Standard deduction: Rs 50,000
- Section 80C exemption: Not applicable in the new tax regime
- Total taxable income: Rs 7 lakh
- Total tax liability: Rs 25,000 (Rs 15,000 on 3-6 lakh and Rs 6-7 ₹ 10,000 on lac)
- Rebate in section 87A: 25 thousand
- Net tax liability: Nil (means no tax on salary up to ₹ 7.5 lakh)
Old tax regime
- Total annual income: Rs 7.5 lakh
- Standard deduction: Rs 50,000
- Section 80C exemption: Rs 1.50 lakh
- Total taxable income: Rs 5.5 lakh
- Total tax liability: Rs 22,500 (₹ 12,500 for 2.5-5 lakh and ₹ 10,000 for 5-5.5 lakh) )
- Rebate in section 87A: In the old tax regime, there is a rebate only on income up to 5 lakhs. Therefore not effective.
- Net tax liability: Rs 22,500 (excluding Cess)
Tax slab structure in the new tax regime
- ₹0 to ₹3 lakh = 0
- ₹3 lakh to ₹6 lakh = 5%
- ₹6 lakh to ₹9 lakh = 10%
- ₹9 lakh to ₹12 lakh = 15%
- ₹12 lakh to ₹15 lakh = 20%
- ₹15 above lakh = 30%
Old tax regime (for individual taxpayers below 60 years)
- 0 to ₹2.5 Lakh = 0
- ₹2.5 Lakh to ₹5 Lakh = 5%
- ₹5 Lakh to ₹10 Lakh = 20%
- Above ₹10 Lakh = 30%
