Budget 2023 has introduced marginal tax relief for small income taxpayers with taxable income exceeding Rs 7 lakh. This relief is applicable only under the new tax regime, and will come into effect from April 1, 2023 (FY 2023-24). It will apply when there is a slight increase in income over Rs 7 lakh, resulting in a significantly higher tax liability.
The new tax regime introduced in Budget 2023 has brought changes to the income tax slabs. As per the new regime, individual taxpayers with taxable income up to Rs 7 lakh can avail a tax rebate of Rs 25,000, which would result in zero tax payment for such individuals. This tax benefit is expected to particularly aid those whose taxable income (after claiming eligible deductions) falls between Rs 7 lakh and Rs 7.5 lakh, as they may otherwise face a higher tax burden due to a slight increase in their income over the Rs 7 lakh threshold.
To understand how marginal relief operates, consider this example:
Let’s say an individual has a taxable income of Rs 7.02 lakh after claiming a standard deduction of Rs 50,000. The total tax payable on this income, including cess, is Rs 26,201. Since there is only a marginal increase in income above Rs 7 lakh (Rs 2,000 in this case), the marginal relief will come into effect, resulting in a lower tax liability. It is important to note that small taxpayers who plan to opt for the old tax regime in the upcoming fiscal year 2023-24, commencing on April 1, 2023, will not be eligible for this marginal relief benefit.
Disclaimer: The information provided in the above post is for general informational purposes only and should not be considered as professional tax advice. Every individual’s tax situation is unique, and tax laws are subject to change. Therefore, it is recommended that individuals seek the advice of a qualified tax advisor or accountant for personalized tax advice based on their specific circumstances.
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Categories: Income Tax
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