Belying expectations, Finance Minister Nirmala Sitharaman did not tinker with the personal income tax rates in the Budget for 2022-23. The minister also did not raise standard deduction, which was widely anticipated in view of elevated inflation levels and impact of the pandemic on the middle class. The standard deduction currently stands at Rs 50,000.
There was no change income tax slabs in the personal income tax category in the Budget unveiled on Tuesday, February 1. The corporate tax rate too was kept at the same level. However, concessional rate of 15% has been extended by one year for newly incorporated manufacturing units.
In Union Budget 2021-22, too, the Union government did not make any changes to the income tax system in place.
In Union Budget 2020, the Union government had introduced reduced tax slabs with a clause that those opting for this will not be able to claim deductions. As per the tax regime, those earning upto Rs 5 lakh did not have to pay any income tax. Those earning between Rs 5 lakh and Rs 7.5 lakh were taxed at 10%, between Rs 7.5 lakh and Rs 10 lakh per year at 15%, between Rs 10 lakh and Rs 12.5 lakh at 20%, between Rs 12.5 lakh and Rs 15 lakh at 25%, and above that at 30%.
However, if individuals wanted to claim deductions, they could continue to do so under the old regime. The old regime dictated that there would be no tax upto Rs 2.5 lakh, 5% between Rs 2.5 lakh and Rs 5 lakh, 20% between Rs 5 lakh and Rs 10 lakh, and 30% for those earning above Rs 10 lakh. Under the proposal, which system would be beneficial to people, was determined on their earnings and the investments they made.