Budget 2023 Exclusive: Govt may allow deductions in new income tax regime - Expectations

Budget 2023: Finance Minister Nirmala Sitharaman will present the Budget 2023-24 on February 1. This would be the last full budget of the Modi government ahead of the 2024 Lok Sabha polls. The expectations are very high from the government with people anticipating some relief in the income tax.

The government had in 2020 introduced a new tax regime. In the new regime, a taxpayer is not allowed to claim exemptions. The new tax regime has six slabs -- 5 per cent, 10 per cent, 15 per cent, 20 per cent, 25 per cent and 30 per cent. 

Sources told Zee Business that the government is actively mulling introducing major changes in the new tax regime to make it attractive.

Also read: Budget 2023: Why investors should keep an eye on railway stocks ahead of Union Budget 

The government is considering introducing below changes in the new tax regime:

- Nil tax on Rs 5 lakh income. At present, taxpayers don't pay income tax if their taxable income is Rs 2.5 lakh and below. In the old tax regime, there is already a provision for those earning up to Rs 5 lakh not to pay any tax.

- Government could allow taxpayers to claim deduction on home loan interest rate in the new tax regime.

- Standard deduction of Rs 50,000 on salary can be allowed.

- Govt could lower the 30 per cent tax threshold. In the new tax regime, income between Rs 2.5 lakh and R 5 lakh attracts a 5 per cent tax. Those earning between Rs 5 lakh and Rs 10 lakh pay 20 per cent tax. Income above Rs 10 lakh is taxed at 30 per cent.

- In the old tax regime as well, the government could lower the tax levied on those earning between Rs 5 lakh and Rs 15 lakh.

While introducing the new tax regime in 2020, the government had allowed taxpayers to choose the regime they want to follow.

In the old tax regime, taxpayers are allowed to claim deductions under 80C, 80D, 24B among others. 

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