The Union Budget 2023 is going to be announced very soon and with it the common man expects changes to be made to the tax slabs
Currently, individuals earning ₹2.5 lakh to ₹5 lakh are required to pay 5% tax, but can effectively make it nil using the tax rebate of ₹12,500 under Section 87A. It is proposed that this tax be removed entirely.
Not every working person who falls under the ₹2.5 lakh to ₹5 lakh bracket may be aware of the available tax rebate. Hence, entirely removing tax for those earning ₹5 lakh or less can be beneficial by removing the need to file taxes and will help low-income earners save more money.
Currently, those earning between ₹5 lakh to ₹10 lakh are meant to pay 20% tax as per the old tax regime. It is expected that this tax be reduced to 10% or 15% at the very least.
People earning in this bracket are usually middle class and the rising cost of living and inflation have affected the common man’s finances in recent years. This reduction in tax would be a welcome relief for taxpayers allowing them to save money and utilise it for necessary expenses.
As per the old regime, people earning above ₹10 lakh are meant to pay 30% tax, which is quite high compared to the new regime. It is expected that the income tax be reduced to 20% for this tax slab to better align it to current financial times.
Over the past few years, inflation has eaten away at the value of the Rupee. An income of ₹10 lakh is considered middle class in urban areas and the reduced tax would immensely help families save up money and invest it to secure their future instead of paying it as tax.
As per the new regime, all those earning ₹15 lakh and above are required to pay 30% income tax, which is quite high compared to tax in many countries. It is expected that the slab is restructured to reduce the tax to 20% for ₹15 lakh to ₹20 lakh and to 25% for people earning above ₹20 lakh.
Although people in this tax slab earn handsomely, they pay absurdly high tax rates compared to their peers abroad. Reducing the tax in this slab would help high earners get more disposable income which would be spent or invested, ultimately helping the economy grow.