Union Budget 2024: While presenting the budget this week, Finance Minister Nirmala Sitharaman informed about the changes in the slabs and rates of income tax. Let’s see how much you will benefit from the proposed changes…
Income Tax Slab: Finance Minister Nirmala Sitharaman presented the full budget for the financial year 2024-25 on Tuesday this week. She made many big announcements in the budget. This budget brought changes especially for the taxpayers who were waiting for changes in the slabs and rates of income tax. The changes proposed in the budget regarding income tax are going to directly affect the taxpayers.
No change in old tax regime
According to the budget documents, the government has proposed changes in the new tax regime i.e. the new tax system under the existing law of income tax. There has been no change in the old tax system. Experts were already assuming that the government could try to make the new tax system attractive in the budget. This is natural because the government has already made the new tax regime the default and wants more and more taxpayers to choose the new system.
Two major changes in the new tax regime
Two major changes have been proposed regarding income tax in this year’s budget. The first change is regarding standard deduction. While presenting the budget, Finance Minister Nirmala Sitharaman increased the benefit of standard deduction to Rs 75,000 under the new tax regime. Currently, taxpayers are getting the benefit of standard deduction of Rs 50,000 in the new tax regime.
Change in income tax slab and rate
The second change is related to the slab and rate of income tax. The scope of the second slab of income tax i.e. the slab with 5 percent rate is now going to increase. The Finance Minister proposes that under the new tax regime, the income tax rate should be 5 percent for annual income above Rs 3 lakh and up to Rs 7 lakh. Earlier, the 5 percent slab was for taxpayers with annual income above Rs 3 lakh but up to Rs 6 lakh. Similarly, the 10 percent slab which was between Rs 6 lakh and Rs 9 lakh, will now be between Rs 7 lakh and Rs 10 lakh. The 15 percent slab till now covered those earning between Rs 9 lakh and Rs 12 lakh. Now, those earning between Rs 10 lakh and Rs 12 lakh annually will be covered under it.
Slabs before and after the budget changes:
In the chart above, you can see what changes have been proposed in the slabs and rates of income tax in the budget. There has been no change in the first slab i.e. 0 percent tax slab. Similarly, no change has been made in the top two slabs i.e. 20 percent and 30 percent rate slabs. The change in slabs is for those taxpayers whose annual income is between Rs 6 lakh and Rs 10 lakh. However, the benefit of increase in standard deduction will also be available to those earning more than Rs 10 lakh annually.
This much income became tax free
Before the changes made in the budget, in the new tax regime, the effective income tax was becoming zero for taxpayers earning up to Rs 7.50 lakh annually. Now its scope will increase to Rs 7.75 lakh. Under Section 87A of the Income Tax Act, taxpayers used to get the benefit of rebate up to Rs 25 thousand. This benefit will still be available, but for those earning more than Rs 7 lakh, the limit of this benefit will be maximum Rs 20,000.
Effective income tax before and after budget changes:
These people will be the most benefited
This means that after the proposed changes in the budget come into effect, taxpayers are going to save up to Rs 28,600 in the new tax regime. Those earning between Rs 7.50 lakh and Rs 7.75 lakh will benefit the most. These changes will be effective for the financial year 2024-25. That is, when taxpayers file returns for assessment year 2025-26 next year, they will get the benefit of these changes.
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