The deduction and rebate besides the tweak in income tax slab individual taxpayers like salaried, pensioner and family pensioners will now be able to pay zero tax if their annual income is Rs 7.5 lakh

Salaried, pensioners to pay nil tax on income up to Rs 7.5 lakh in new tax regime

Post Budget 2023, salaried individuals, pensioners and family pensioners pay no tax on income upto Rs 7.5 lakh under the new tax regime. Budget 2023 proposes to increase rebate under Section 87A in such a way that taxpayers who earlier had to pay zero income on income up to Rs 5 lakh will now pay zero tax for income up to Rs 7 lakh. What it means that the quantum of maximum rebate under 87A rebate has been hiked from Rs 12500 to Rs 25000 under the new tax regime to make tax liability as Nil for the income tax payer with income up to Rs 7 lakh.

Additionally, Budget 2023 has extended standard deduction of Rs 50,000 to the above category of people in the new tax regime. Earlier, standard deduction was available only to salaried and pensioners opting for the old tax regime.

As a result of the deduction and rebate besides the tweak in income tax slab individual taxpayers like salaried, pensioner and family pensioners will now be able to pay zero tax if their annual income is Rs 7.5 lakh.

Zero tax at Rs 7.5 lakh income under new regime

Income from salary

750000

Less Standard deduction

50000

Net Taxable Income

700000

Tax Payble

25000

Less 87A rebate

25000

Final tax payable

0

Budget 2023

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On the other hand, new tax regime, they had to pay taxes on income above Rs 5 lakh. This push of Rs 2 lakh extra deduction in the new tax regime will make it attractive for many salaried taxpayers with income up to Rs 7.5 lakh. However for non salaried taxpayers income up to Rs 7 lakh will result in nil tax payment.

Moreover, in absence of many deduction and exemption the tax filing will be much simpler.
However, if you are expecting your income to go up in coming years and there is likelihood of utilising the deductions and exemptions under the old regime then you may have to go for old regime again. Do remember that if you are a salaried person and do not have any business income the current tax law allows you to change your tax regime every year.


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This story originally appeared on: India Times - Author:Faqs of Insurances