Budget 2023 proposed numerous significant announcements— one of the major announcements being the introduction of the standard deduction of ₹50,000 in the new regime as well, available to salaried and pensioners including family pensioners. Thus, making the new tax regime further attractive.
The FM, Nirmala Sitharaman announced that “Each salaried person with an income of ₹15.5 lakhs or more will thus stand to benefit by ₹52,500.”
This led to a little confusion among the general public and also professionals as many articles and newsletters suggested that the standard deduction of ₹52,500 would be available to salaried people with income of and above 15.5 lakhs, which is not the correct understanding.
So, we decided to ease some pain by explaining the correct interpretation of the statement.
- The amount of ₹52,500 represents the tax benefit that an individual will receive under the proposed new tax slab on the income of 15.5 lakhs, compared to the earlier new regime slab rates.
Slab rates: Earlier New Regime v/s Updated New Regime
Income slab rates under the new regime have been reduced from six to five as shown below:
Let’s understand the taxability with the help of an example under the new regime,
A salaried individual is eligible to claim a standard deduction of ₹50,000 under the new regime, irrespective of any amount of income.
The above table clarifies, if the income is ₹15.5 lakhs or above, then the benefit will be increased to ₹52,500.
The amendments proposed in budget 2023 will be applicable from FY 2023 - 24 and AY 2024 - 25.
Read about Section 115BAC - Understanding the New Tax Regime - Learn by Quicko.