Is Financial Bill 2023 (amendment) Beneficial to High Tax Payers?
August 10, 2023
In India income tax is progressive in nature that
means it increases with increase in income. The tax slab change overtime
considering the fluctuations of inflation level. Gross tax revenue has
increased by 10.4% based on the union budget 2023-24.
The slab rate of income tax shows that with increase
income an individual is shifting to highest slab. As a result, even an
individual earn just above a certain threshold limit may find themselves
subject to much higher tax rate on their entire income. In such situations
finance act is allowing marginal relief as a relaxation to tax payers. The
concept of marginal relief is applicable with surcharge in both old and new
regime whereas with tax rebate u/s 87A in new regime only.
It is easy to clear the concept of marginal relief
with examples.
Suppose Mrs. Renna has total Income of Rs.50,90,000
her tax liability can be calculated as under. (As the income of Reena is above
50 lakh, she is subject to surcharge @ 10%)
As per old tax regime
|
Particulars |
Amount
(Rs.) |
|
Total income |
50,90,000 |
|
Tax
(as per old regime slab rate) (a) |
13,39,500 |
|
Surcharge (as per table 1) (b) |
1,33,950 |
|
Tax payable (a+b) = c |
14,73,450 |
|
No surcharge limit
(d) |
50,00,000 |
|
Income
over surcharge limit
(e)
|
90,000 |
|
Tax on 50000
(f) |
13,12,500 |
|
Increased
tax (a-f) = (g) |
1,60,950 |
|
Marginal relief
(h) |
70,950 |
|
Surcharge
(after applying marginal relief) (e-g) |
63,000 |
|
Net tax payable (without cess) (c-h) |
14,02,500 |
|
Saving in tax due to marginal relief |
63,000 |
From the illustration it’s clear that with an increase
in the income of Rs. 90,000 tax increased by Rs. 1,60,950. Difference between
increased tax (Rs.1,60,950) and increased income (Rs.90000) is allowed as
relief and there by Reena is able to save Rs.63,000.
By the amendment of financial bill 2023 rebate u/s 87A
is available to tax payers under new regime only. The bill promotes tax payers
to follow new tax regime by offering greater benefits. But the thing is that it
is not beneficial to the whole tax payers thus, it should be revised. It can be
illustrated as below.
|
Scenarios |
I |
II |
III |
IV |
V |
|
Total income |
7,00,000 |
7,10,000 |
7,20,000 |
7,27,780 |
7,30,000 |
|
Tax payable (before marginal relief u/s 87A) (b)
|
25,000 |
26,000 |
27,000 |
27,780 |
28,000 |
|
Excess income above 7 lakh (c) |
---------- |
10,000 |
20,000 |
27,780 |
30,000 |
|
Excess of tax over income earned over
7 lakh (b-c) |
25,000 |
16,000 |
7000 |
---------- |
(-2000) |
|
Rebate available u/s. 87 A (d) |
25,000 |
16,000 |
7,000 |
---------- |
---------- |
|
Net tax payable (without cess) (b-d) |
---------- |
10,000 |
20,000 |
27,780 |
28,000 |
|
Savings due to
marginal relief |
25,000 |
16,000 |
7,000 |
Nil |
Nil |
The above
illustration shows that from scenario I to scenario III the marginal relief is
decreasing in a high proportion moreover there is no rebate or relief to the
scenario IV and V
From this we can conclude that the introduction of amended financial bill 2023 do not give any benefit to high income group of people. It’s clear that individuals with income of Rs. 7,00,000 need not want to pay any tax as same before in financial bill 2023. The whole benefit of relief is available up to income of Rs.7,27,770. Government should take measures to make necessary changes in the old as well as new tax regime.
Sources:
https://incometaxindia.gov.in/Pages/budget-and-bills/finance-bill.aspx
Sajna Mini Mol, Assistant Professor of Commerce, Al Shifa
College of Arts and Science, Keezhattur, Perinthalmanna
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