Taxation
Understand your tax liability with Budget 2023
Union Budget 2023 has brought a host of welcome changes for income taxpayers, with the income tax slabs being revised under the new tax regime. In this blog, we will discuss how these changes can help you understand your tax liability and how you can save money through investments such as Home Loans.
Tax rebate limit raised to Rs. 7 lakh
The biggest benefit of the new tax regime is the increased income limit for rebates. The earlier rebate limit of Rs. 5 lakh has been raised to Rs. 7 lakh. This will result in individuals earning up to Rs. 7 lakh being completely exempted from paying taxes.
A resident with an income of up to Rs. 7 lakh will get a tax rebate from either of the following 2 options (whichever is lower) -
- a tax rebate of Rs. 25,000
- a tax rebate equal to the amount of tax payable under Section 87A for Financial Year 2023-24
(Assessment Year 2024-25).
So, while earlier you did not have to pay tax if your income was Rs. 5 lakh or lower, now you will be exempt from paying tax if your income is Rs. 7 lakh or lower.
But if your income is above Rs. 7 lakh, even if it is say Rs. 7.10 lakh, you will have to pay tax based on the following income slabs, provided you opt for the New Income Tax Regime.
Changes in Income Tax slabs
| Income slabs (Rs) | Rate of Tax under New Regime |
|---|---|
Up to Rs. 3 lakh | Nil |
Between Rs. 3 lakh and Rs. 6 lakh | 5% |
Between Rs. 6 lakh and Rs. 9 lakh | 10% |
Between Rs. 9 lakh and Rs. 12 lakh | 15% |
Between Rs. 12 lakh and Rs. 15 lakh | 20% |
Above Rs. 15 lakh | 30% |
Maximum Tax (Including Surcharge) will be 39%
In the new tax regime, the highest surcharge payable under personal income tax has been cut from 37% to 25%. As a result, the maximum tax rate on the highest income bracket, which is currently 42.744% (including all levies), will be reduced to 39%.
However, this surcharge reduction will only be applied under the new tax regime, as no surcharge reduction is planned for those who want to remain under the old tax regime.
| Taxable Income | Surcharge as per Old Regime | Surcharge as per New Regime |
|---|---|---|
Between Rs. 50 lakh and Rs. 1 crore | 10% | 10% |
Between Rs. 1 crore and Rs. 2 crore | 15% | 15% |
Between Rs. 2 crore and Rs. 5 crore | 25% | 25% |
Above Rs. 5 crore | 37% | 25% |
However, this surcharge reduction will only be applied under the new tax regime, as no surcharge reduction is planned for those who want to remain under the old tax regime.
Also Read: [Tax Benefits on Home Loan - Apply for Housing Loan]
New Income Tax Regime to be default regime
One of the most significant changes introduced in the Budget is that the new income tax regime will be the default regime. This means that taxpayers will now have to choose between the old and the new tax regime, and the new regime will be the default option unless they choose otherwise. This is expected to simplify the tax-filing process and reduce the compliance burden on taxpayers.
It may also be noted that most of the deductions (LIC, PPF, repayment of housing loan principal, interest from Savings Account and Tax Saver FD, or deductions related to insurance premiums) and set-off of interest on housing loan interest ( max. up to INR 200,000) under the old regime are still not available under the new regime.
So, if you are a home loan borrower, calculate how much tax save you can save by claiming the deduction towards repaying your home loan principal and interest, as well as the tax impact based on your income slab, before choosing between the old and new tax regimes.
For calculating the home loan EMI, you can use the Axis Bank Home Loan calculator. This tool estimates the monthly payments and the overall home loan interest. By using this calculator, you can get a better idea of the financial commitment involved in taking a home loan and make an informed decision about your loan.
Conclusion
Budget 2023 has made it easier for taxpayers to reduce their tax liability by increasing the tax rebate limit and revising the income tax slabs. Additionally, the new income tax regime will simplify the tax-filing process, making it easier for you to comply with your tax obligations.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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