Union Finance Minister Nirmala Sitharaman will present the Union Budget 2023 on February 1, 2023, in Parliament. The common man expects a change in tax slabs and some tax waivers for the coming year. Let’s know more about the Indian tax regime. India follows a progressive tax slab for individual taxpayers. There are varied factors through which the Indian tax slabs are decided. Some of them are:
• Normal taxpayers (age under 60), seniors (age over 60 but under 80) and super seniors (age over 80), where seniors benefit from a higher baseline exemption threshold for income subject to tax.
• The individual’s income levels, with high earners being liable to higher tax rates.
• In addition, there is a tax surcharge that is based on income.
• The tax plus surcharge is subject to a 4% health and education cess.
• Individual taxpayers may also be subject to the old tax regime and the new tax regime. With the new tax regime, the individual is required to give up several deductions and exemptions, which results in lower tax rates.
The basic exemption threshold was increased in the Union Budget 2014-15 from 2,00,000 to 2,50,000 rupees. The 80C deduction ceiling under the Income Tax Act of 1961 was increased from 1,00,000 to 1,50,000 rupees in the same year. The Act’s Section 80 also permits several deductions to lower the taxable income range such as donations to Employee Provident Funds, child tuition, life insurance premium payments and donations made to relief funds and charitable institutions, among others.
While some countries have a flat tax rate, the majority like the USA, Canada and Japan, among others, have progressive tax slab rates. Additionally, the tax rates vary according to factors like residency, marital status, income source etc. While there is no personal income tax in the Middle East, it is between 10% and 60% in other nations. Here are the maximum marginal tax rates that taxpayers have to pay around the world:
India- 42.74%
Canada-33%
US- 37%
France- 45%
Finland- 56.95%
Germany- 45%
UK- 45%
China-45%
Hong Kong- 15%
Japan- 55.97%
Singapore- 22%
Australia- 45%
Personal tax rates have a significant negative impact on an individual’s income. Individual taxpayers’ purchasing power is increased when personal taxes are reduced.
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