Individual taxpayers earning Rs 7 lakh will benefit from the new tax structure

Under the new income tax regime, the government has provided additional relief to taxpayers by modifying it so that individuals earning more than the tax-free limit of Rs 7 lakh per year do not wind-up paying tax in excess of their incremental income above the threshold. The ruling is expected to sweeten the new tax regime even more, especially for small taxpayers. The government raised the scope of the entire income tax rebate under the new tax regime to an annual taxable income of Rs 7 lakh from Rs 5 lakh previously in the Union Budget for 2023-24. Those earning even little more over the threshold, however, were forced to pay tax on sub-Rs 7 lakh slabs as well. To assist such taxpayers, the government revised the Budget Bill to limit the tax outlay to the incremental taxable income exceeding Rs 7 lakh per year.

While no modifications were made to the old tax scheme in the Budget, the government expanded the scope of refund to individuals with taxable income of Rs 7 lakh per year, up from Rs 5 lakh in the new system. The super-rich—those with an annual income of more than Rs 5 crore—will also benefit from a large reduction in income tax surcharge to 25% from 37% under the new regime. This would cut the effective income tax rate for this category from 42.7 percent to 39 percent. The new plan also rationalized the tax burden by adjusting its slabs and introducing the benefit of standard deduction.