Finance Bill, 2023 has proposed to reduce rates of tax applicable on middle class

The Minister of State, Shri Pankaj Chaudhary in the Ministry of Finance in a written reply to a question raised in Lok Sabha Stated, “Finance Bill, 2023 has proposed to reduce rates of tax applicable on middle class.”

Finance Bill, 2023 has proposed to reduce rates of tax applicable in case of individual or Hindu undivided family or association of persons [other than a co-operative society], or body of individuals, whether incorporated or not, or an artificial juridical person by introducing a new tax regime under the proposed sub-section (1A) of section 115BAC of the Income-tax Act, 1961 (the Act), so as to provide that with effect from assessment year 2024-25, the following rates, as provided under the said sub-section, shall be the rates applicable for determining the income-tax payable in respect of the total income of such person:—

Further, the income-tax payable in respect of the total income of the person [other than a person who has exercised an option under sub-section (6) of section 115BAC], shall be computed without allowing for any specified exemption or deductions. However, standard deduction as provided under clause (ia) of section 16 of the Act, deduction in respect of income in the nature of family pension as provided under clause (iia) of section 57 of the Act and deduction in respect of the amount paid or deposited in the Agniveer Corpus Fund as provided under the proposed sub-section (2) section 80CCH of the Act, shall be allowed for the purposes of computing the income chargeable to tax under sub-section (1A) of section 115BAC.

The new tax regime under proposed sub-section (1A) of section 115BAC of the Act is not mandatory and taxpayers can opt to be in the old tax regime after availing the exemptions or deductions under the Act.

The above proposed tax regime intends to provide significant relief to middle class tax payers.

Several proposals are examined during the annual budgetary exercise and the outcome of the same is reflected in the Finance Bill. The details of the new tax regime as proposed in the Finance Bill, 2023 has been provided in above.

The 7th CPC Report in Para No. 4.2.6 has shown real increase given by the Central Pay Commission/ Government over the previously set minimum pay as under :

The details of the standard deduction and other relief measures given under various sections of the Income-tax Act to employees/pensioners are provided in the Annexure.

Section 192 of the Act provides that every person responsible for paying any income which is chargeable under the head ‘salary’ (salary, inter-alia, includes pension), shall deduct income tax on the estimated income of the assessee under the head salaries. The tax is required to be calculated at the average rate of income tax as computed on the basis of the rates in force. The deduction is to be made at the time of the actual payment. However, no tax is required to be deducted at source, unless the estimated salary income exceeds the maximum amount not chargeable to tax applicable in case of an individual during the relevant financial year.