Budget 2024: New Income Tax Regime Slab Rate Revised, Standard Deduction Raised
Standard Deduction raised to Rs 75,000. There will be no tax for income up to Rs 3 lakh under the revised tax slab rates
The government announced on Tuesday an increase in the standard deduction to Rs 75,000 from Rs 50,000 in the Union Budget 2024–25, a move that is expected to benefit salaried individuals, providing them with higher tax savings and greater disposable income.
"From the revenue perspective, it does not make sense to enhance the slab rate and exempt more. To keep more people within the net, the increase in standard deduction was needed," said Samir Kanabar, tax partner at EY India.
The standard deduction in the new tax regime was raised from Rs 5 lakh to Rs 7 lakh in Budget 2019. Initially, the new tax regime did not contain a standard deduction, but this was included as an incentive to move to the new system in Budget 2023.
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Tax slab rates in the new tax regime have also been revised in the Budget 2024 presented by Finance Minister Nirmala Sitharaman. These revised slabs are set to enable salaried employees to save up to Rs 17,500, she said.
There will be no tax on income up to Rs 3 lakh. Income from Rs 3 lakh to Rs 7 lakh will be taxed at 5%. Income from Rs 7 lakh to Rs 10 lakh will be taxed at 10%. Income from Rs 10 lakh to Rs 12 lakh will be taxed at 15%. Income from Rs 12 lakh to Rs 15 lakh will be taxed at 20%. Income earned above Rs 15 lakh will be taxed at 30%.
The first two income brackets have been extended by a lakh and the brackets of the last two slabs remain unchanged.
Changes in the tax slab is one progressive step for rationalisation and long term movement towards the new regime, according to Arvind Rao, founder of Arvind Rao & Associates.
Someone earning Rs 10 lakh will save around Rs 10,000 per annum. The higher income earners will also have around Rs 17,500 savings in this slab rate, he said.
"The attempt is to move people out of the exemption based tax regime," said Kanabar.
More than half of the tax payers have already opted for the new tax regime, according to the Finance Minister. These further changes are indented to move more people to the new regime.
"Once the critical mass is moved to the new tax regime, the old tax regime will see its sunset," he said.
The pervious slab in the new tax regime before this revisions had the lowest slab rates at Rs 3 lakh.
Income above Rs 3 lakh and up to Rs 6 lakh was taxed at 5%, and the rate rose by 5 percentage points for every slab above that, with the highest rate on income above Rs 15 lakh at 30%.
