Budget 2024 has changed in the income tax slabs under the new tax regime. The changes have been made at the lower level of the income tax slabs, and this will largely benefit the lower- and middle-class taxpayers.
It is important to note that the changes in the income tax slabs under the new tax regime are effective from April 1, 2024, i.e., for the ongoing fiscal year, 2024-25. Hence, salaried and other taxpayers need to rework their income tax liability to know which income tax regime is beneficial for them or minimum deductions they must claim to continue with the old tax regime.
Here are the latest income tax slabs under both the tax regimes that will be applicable on taxpayers’ incomes for FY 2024-25 (AY 2025-26). The Budget 2024 has been passed by the Lok Sabha.
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The changes in the income tax slabs raised the upper limit in two slabs by Rs 1 lakh. The Rs 3 lakh-Rs 6 lakh slab has become Rs 3 lakh-Rs 7 lakh; and the Rs 6 lakh-Rs 9 lakh slab has become Rs 7 lakh-Rs 10 lakh. This means people earning Rs 7 lakh would be taxed at 5% instead of 10% earlier; and those earning Rs 10 lakh would be taxed at 10% instead of 15% earlier.
The new income tax slabs are under the new tax regime and will be applicable for all individual taxpayers irrespective of age. There is no different income tax slabs for individuals below 60 years of age, senior citizens and super senior citizens.
Budget 2024 has not made any changes in the income tax slabs and rates under the old tax regime. The slabs applicable to an individual under the old tax regime depend on the age.
Here are the income tax slabs for individuals below 60 years, senior citizens (60 and above but below 80 years) and super senior citizens (80 years and above).
Income tax slabs for individuals below 60 years of age
A cess of 4% is levied under both the tax regimes — new and old — on the income tax amount. A surcharge is also applicable on incomes exceeding Rs 50 lakh in both the tax regimes. However, the surcharge rates are different in old and new tax regimes for incomes exceeding Rs 50 lakh. The surcharge rates are lower in the new tax regime than in the old tax regime.
Given below are the surcharges rates under the old and new tax regimes.
The new tax regime is the default tax regime. Income tax rules allow an individual who does not have any business income to choose any tax regime in a financial year as per their convenience.
The new tax regime does not allow most of the deductions and exemptions except two — which means a salaried individual can claim only two deductions under the new tax regime. These are standard deduction from salary income and deduction on employer’s contribution to the employee’s NPS account.
Budget 2024 has made changes in the deductions in the new tax regime. It has raised the standard deduction limit to Rs 75,000 from Rs 50,000 – an increase of Rs 25,000. Deduction on employer’s contribution to the employee’s NPS account has also been hiked to 14% from 10%. A hike of 4% will allow salaried individuals to save more tax.
As mentioned above, there is no change in the income tax rules under the old tax regime. Under the old tax regime, a salaried individual can claim standard deduction of Rs 50,000 and deduction on the employer’s NPS contribution for up to 10%. Apart from these, the old tax regime allows an individual taxpayer to claim common deductions such as Section 80C (up to Rs 1.5 lakh on specified investments and expenditures) and Section 80D (up to Rs 25,000/Rs 50,000 for health insurance premium paid), among others.
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