Budget 2023: Income Tax benefit for salaried Employees.

In the Union Budget 2023 of India, the Finance Minister proposed an increase in the tax exemption limit for salaried employees from INR 2.5 lakh to INR 5 lakh. This means that individuals earning up to INR 5 lakh per annum will not have to pay any income tax. Budget 2023-24 provides a significant tax benefit to the middle-class population and boosts disposable income. However, it’s important to note that this proposal is subject to parliamentary approval.

Income Tax is a tax levied by the government on an individual’s or a company’s income. In India, the Income Tax Act of 1961 governs the rules and regulations related to the taxation of income.

Beyond certain income limits, individuals have to pay income tax if their annual income exceeds the exemption limit. Union Budget 2023 increased tax limits to INR 5 lakhs. The tax rate for individuals depends on their income slab, with higher income attracting a higher tax rate.

For example, for the financial year 2022-23, individuals earning between INR 5 lakh and INR 10 lakh per annum are taxed at a rate of 5%, while those earning above INR 10 lakh are taxed at a rate of 20%.

In addition to the regular income tax. Individuals may also be required to pay additional taxes such as:

1. Securities Transaction Tax (STT),
2. Wealth Tax, or Fringe Benefits Tax (FBT).
3. Companies are taxed at a separate rate, which is currently set at 25%.

In India, individuals can avail of various tax benefits to reduce their taxable income and thereby their tax liability. Some of the common tax benefits available to individuals include:

• House Rent Allowance (HRA) Exemption:

HRA received by an employee as a component of their salary is exempt from tax, subject to certain conditions.

• Home Loan Interest Deduction:

Interest paid on a home loan is eligible for tax deduction under section 80C of the Income Tax Act, up to a limit of INR 2 lakh per financial year.

• Provident Fund (PF) Contribution:

Employees’ contributions to Provident Fund are eligible for tax deduction under section 80C, up to a limit of INR 2 lakh per financial year.

• Tax-Saving Investments:

1. Public Provident Fund (PPF),
2. National Pension System (NPS),
3. Equity-Linked Saving Scheme (ELSS), life insurance premiums,
4. NSC ( National Savings certificate)
5. Among others, Investments are eligible for tax deduction under section 80C, up to a limit of INR 2 lakh per financial year.

• Medical Insurance Premium:

Premiums paid for medical insurance are eligible for tax deduction under section 80D of the Income Tax Act, up to a limit of INR 25,000 per financial year.

Tax benefits are subject to terms and conditions and are subject to change. Consult a tax professional for the most up-to-date information on tax benefits and eligibility.

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Budget Speech 2023 India: Income Tax benefit for salaried Employees

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