Due to tax brackets being frozen in 2013, you are paying more taxes than necessary right now.

With appropriate surcharge and cess, the top marginal income tax rate is 30%. However, since the 2013 tax rates have been locked, anyone paying taxes in the 30% bracket effectively pays a 42% to 50% slab rate.

Some income tax brackets remain the same after ten years. 2013 saw the most recent revision to the 20% and 30% slabs. 2023 will see a 20% tax rate on income over Rs 5 lakh and a 30% tax rate on income over Rs 10 lakh.

The top marginal income tax rate, including any relevant surcharge and cess, is 30%. However, because the tax rates are set to remain the same in 2013, we estimated that anyone paying taxes in the 30% bracket is actually paying a 42% to 50% slab rate.

According to our calculations, someone who earns Rs 12 lakh in taxable income, for instance, is paying extra taxes of Rs 49,327, or Rs 4111 per month.

Tax Brackets Must Be Improved
The old system’s tax brackets, which are still preferred by the vast majority of income taxpayers, need to be improved.

All improvements to this regime over the past ten years have been made in order to meet the demands of those with incomes under Rs 5 lakh. Incomes have increased along with inflation, nevertheless. Therefore, tax rates at all income levels should be reduced and the brackets should be increased.

New Regime Is Insufficient

Taxpayers overwhelmingly favour the previous administration. It proves that the new administration’s present tax brackets are insufficient to entice more taxpayers.

In reality, the new system performs a good job of guiding taxpayers toward an inflation-adjusted tax rate. On incomes up to about Rs. 12 lakh, this appears to occur. Taxpayers nevertheless frequently choose the previous administration.

Even the new system with higher tax bands, above that threshold, is unable to offer inflation-adjusted tax benefits.

It’s Time For Improvements

With inflation, tax brackets have not kept up. In fact, the old tax brackets being frozen in 2013 prohibit people from receiving significant tax cuts. We can only hope that these brackets will be improved by 2023.