Govt Announces New Tax Slabs, Hikes Standard Deduction In New Tax Regime
By : Falaknaaz Syed
Update: 2024-07-24 05:41 GMT
Mumbai: The government in the Union Budget 2024-25 presented on Tuesday revised the tax slab rates and the standard deduction for the individuals under the new tax regime but did not make any changes in the old tax regime indicating that the government may be focused on making the new tax regime the standard, perhaps scrapping the old tax regime in near future. For individual taxpayers under the New Tax Regime, a reduction in the tax rate and an increase in the limit of the standard deduction from Rs 50,000 to Rs 75,000 will lead to a minimum tax saving of Rs 10400 for those with an annual salary of Rs 10 lakh and a maximum saving of Rs 18200 for the super-rich category having annual taxable income of Rs 20 lakh and above.
The revised scheme maintains the income exemption up to Rs 3 lakh but modifies subsequent tax slabs. The second tax slab, previously Rs 3 lakh to Rs 6 lakh, is now Rs 3 lakh to Rs 7 lakh. The third slab extends from Rs 7 lakh to Rs 10 lakh, an increase from the earlier Rs 7 lakh to Rs 9 lakh. Similarly, the fourth slab now covers Rs 10 lakh to Rs 12 lakh, up from Rs 9 lakh to Rs 12 lakh. The remaining slabs remain unchanged.
Further, an additional deduction of 4 per cent of the basic salary is provided towards the employer’s contribution to the National Pension Scheme (NPS) for employees working with private sector and public sector banks and undertakings and have opted for the New Tax Regime.
“For example, any individual with a basic salary plus dearness allowance of Rs one lakh per month may now be eligible to claim an additional deduction of Rs 4,000 per month / Rs 48,000 per annum for employer’s contribution to NPS and save annual tax of Rs 14,976,” said Preeti Sharma, Partner, Global Employer Services, Tax & Regulatory Services, BDO India.
Says Anil Rego founder and CEO of Right Horizons, “In most cases, it is better to opt for the new tax regime. In case you have a home loan, you should compute the tax savings in both the regime and then use the beneficial one for you.”
The finance minister Nirmala Sitharaman said that the government would undertake a comprehensive review of the Income Tax Act 1961 within the next six months to make it more concise, easy to understand and reduce disputes and litigations. Sitharaman said that a beginning is being made in the Finance Bill by simplifying the tax regime for charities, TDS rate structure, provisions for reassessment and search provisions, and capital gains taxation. She added that two tax exemption regimes for charitable trusts will be merged into one.