The Finance Minister of India, Nirmala Sitharaman, announced the Union Budget for the next fiscal year during a speech on Wednesday. In her speech, she proposed a hike in tax exemption on leave encashment on retirement for non-government salaried employees, increasing the limit from ₹3 lakh to ₹25 lakh. This change was made as the limit of ₹3 lakh was last fixed in 2002, and with the increase in government salaries, the Finance Minister deemed it necessary to increase the limit.
Leave encashment refers to the money received by employees in exchange for unused leaves and is taxed based on when it is received. The Finance Minister also proposed to enhance the slab for applicability of tax on leave encashment for retirees to ₹10 lakh and to reduce the highest tax rate for high earners from 42.74% to 39%.
Additionally, the Finance Minister announced a change in the tax structure, reducing the number of tax slabs to 5 and increasing the tax exemption limit to ₹3 lakh.
The new tax regime will now be the default tax regime, but people can still opt for the old tax structure if they wish to avail more exemptions. Pensioners will also benefit from the new tax regime with the extension of standard deduction. Salaried individuals with an income of ₹15.5 lakh or more will benefit by ₹52,500.
Overall, the proposed changes in the Union Budget aim to put more money in the hands of individuals, thereby stimulating savings or consumption. The processing of IT returns has also been reduced from 90 days to 16 days, with refunds being processed within a day, further benefiting individuals.
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