In a relief to taxpayers opting for new tax regime, individuals earning marginally higher income than no-tax ceiling of ₹7 lakh will pay tax only on the differential income after the government amended the Finance Bill.
The Finance Bill 2023, passed by the Lok Sabha on Friday, has proposed a marginal relief to taxpayers under new tax regime.
Explaining the provision, the finance ministry said under the new tax regime with effect from April 1, if a taxpayer has annual income of ₹7 lakh they pay no tax. But if they have income of ₹7,00,100 they will be paying a tax of 25,010.
Thus an additional income of ₹100 leads to a tax of ₹25,010.
Hence, a marginal relief is proposed so that the tax what one pays should not be more than the income that exceeds ₹7 lakh (Rs 100 in this case), the ministry said.
Nangia Andersen LLP Partner Sandeep Jhunjhunwala said the amendment to Finance Bill seeks to provide a marginal relief to individual taxpayers having borderline income by proposing a deduction of income tax payable in excess of the differential income above ₹7 Lakh.
"Working out the math, an individual having income up to (approx.) ₹7,27,700 could stand to benefit from this marginal relief," Jhunjhunwala added.
The budget 2023-24 had announced the tax rebate whereby no tax would be levied on those with annual income of up to ₹7 lakh under the new tax regime. The move which experts felt was a push for salaried class taxpayer to switch to new tax regime where no exemptions on investments is provided.
Under the revamped new tax regime, no tax would be levied for income up to ₹3 lakh. Income between ₹3-6 lakh would be taxed at 5 per cent; ₹6-9 lakh at 10 per cent, ₹9-12 lakh at 15 per cent, ₹12-15 lakh at 20 per cent and income of ₹15 lakh and above will be taxed at 30 per cent. Further, a ₹50,000 standard deduction was allowed under the new regime.
Now the government has brought in amendments to the Finance Bill 2023, which has given 'marginal relief' to those taxpayers with annual income a little over ₹7 lakh.
Although the government has not specified the threshold income which would be eligible for marginal relief, tax experts said as per computation, individual taxpayers with income of ₹7,27,777 would be benefited by this relief.