Budget 2023: Big changes in new income tax regime

Union Budget 2023 was presented by Finance Minister Nirmala Sitharaman today which unveiled one of its biggest jumps in capital spending in the past decade and said the fiscal deficit would fall next year.

The Budget adopted “seven priorities” – inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power and financial sector – to guide India through the “Amrit Kaal”.

The main highlight of the budget was the five major announcements related to personal income tax, including a change in tax slab under the new tax regime.

The government made income of up to Rs 3 lakh tax-exempt under the new income tax regime. Those with income of up to Rs 7 lakh will now get a rebate and needn’t pay any income tax under the new regime. Sitharaman also said that the new income tax regime would be the “default regime”.

Earlier, total income of up to Rs 2.5 lakh was exempt from tax under the new income tax regime. The rebate that is now being made available to people who earn up to Rs 7 lakh a year was earlier available to taxpayers earning up to Rs 5 lakh per year.

The taxation structure has also been reduced to five brackets. Sitharaman said taxpayers will pay Rs 45,000 tax for income of up to Rs 9 lakh as against Rs 60,000 earlier. She also reduced the highest surcharge rate from 37% to 25% in the new tax regime.

“This is the first budget in Amrit kaal, it hopes to build on the foundation laid by the previous budget and the blueprint drawn for India at 100,” Sitharaman said. During her budget speech, the finance minister said the focus remains on widening the scope of economic growth, boosting key areas like infrastructure and manufacturing and job creation.

The finance minister said the government has implemented a scheme to supply free food grains to priority households for the next one year, under PM Gaarib Kalyan Anna Yojana. The entire expenditure of about Rs 2 lakh crore will be borne by the government, said the finance minister.

As expected earlier, the finance minister made several announcements to boost the overall agricultural sector, including providing affordable solutions for challenges faced by farmers. She announced an agriculture accelerator fund to “transform” the sector.

The agricultural credit target will be increased to Rs 20 lakh crore, with focus on animal husbandry, dairy and fisheries. “We will launch a new sub-scheme with targeted investment of Rs 6,000 crore to aid activities of fishermen, fish vendors and MSMSEs,” said Nirmala Sitharaman.

The finance minister said 157 new nursing colleges will be established in co-location with the existing 157 medical colleges established since 2014. ICMR labs will be made available for research by public and private medical college faculty and private sector R&D teams, to encourage collaborative research and innovation.

The fiscal deficit target for FY24 has been reduced to 5.9 per cent of the GDP, compared to 6.4 per cent for FY23. The finance minister said, “I reiterate my intention to bring the fiscal deficit below 4.5 per cent of GDP by 2025-26.”