FM income tax googly for the middle class

BIt is actually a googly. New rates will be found irressistibly attractive by the vast majority which is why she has described it as default but there are people who would cling to the old in view of their capacity to save tax by availing of exemptions and deductions

udget 2023 has done something substantial for the middle class that has been chafing at the bit awhile, over the lack of any sizeable reduction in its incometax burden.

In the assessment year 2023-’24 i.e., for financial year 2023-’24, those with an income of up to Rs 7 lakh need not pay any income tax. This is up Rs 2 lakh from the earlier slab of Rs 5 lakh being insulated from tax. For those with income in excess of Rs 7 lakh too, there is relief, with the tax-free threshold going up to Rs 3 lakh, from the previous Rs 2.5 lakh. The tax rates for income in excess of Rs 3 lakh have been cut and successive slab progressions are less steep. For AY 2022-’23, the rates were 5 per cent on income between Rs 2.50 lakh and Rs 5 lakh, 20 per cent on income between Rs 5 lakh and Rs 10 lakh and 30 per cent on income in excess of Rs 10 lakh. In AY 2023-’24, it is going to be less steep. Tax on Rs 0-3 lakh income is nil. Incomes between Rs 3 lakh and up to Rs 6 lakh will be taxed at 5 per cent; income between Rs 6 lakh and up to Rs 9 lakh will be taxed at 10 per cent; income between Rs 9 lakh and Rs 12 lakh, will be taxed at 15 per cent; income between Rs 12 lakh and up to Rs 15 lakh will be taxed at 20 per cent, whle income above Rs 15 lakh will be taxed at 30 per cent.

The UK provides for an index-based tax-free threshold, which automatically increases in sympathy with inflation. In India, it remains static until the government bestirs. Bestirred it has, at last.