New Tax Regime Rebate Limit Change: If your taxable income is marginally over Rs 7 lakh, you may have to pay no tax on the extra income, according to a new proposal reportedly being considered by the Income Tax Department. Following are 5 points to know about the expected marginal relief to taxpayers being considered by the income tax authorities.
The Financial Express reported today that marginal tax relief for individuals whose income is a tad over Rs 7 lakh could be in the works. The proposal may be introduced through amendments in the Finance Bill 2023. (Read full report here).
Relief through deduction
The marginal relief may be provided through a small deduction that will keep marginal income above Rs 7 lakh below the taxable limit.
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Why this change?
In Budget 2023-24, Finance Minister Nirmala Sitharaman proposed to increase the income tax rebate limit under New Tax Regime to Rs 7 lakh. The proposal would have made income up to Rs 7 lakh tax-free in FY 2023-24. However, individuals whose income exceeded the Rs 7 lakh limit by a few 1000 rupees were concerned that they would not be able to fully enjoy the tax rebate up to Rs 7 lakh income.
The Financial Express reported sources as saying that an exception may be made in cases where the income above Rs 7 lakh is marginally above Rs 7 lakh.
New Tax Regime to become more attractive
Making marginal income above Rs 7 lakh tax-free will make the New Tax Regime more attractive as there are a large number of taxpayers who will benefit if this proposal goes through. The Government is hoping that this move will convince more taxpayers to opt for the New Tax Regime.
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When to expect the change
The expected relief for taxpayers under the New Regime may become effective in the New Financial year starting April 1, 2023.