Jul 23, 2024 08:34 PM IST
The Centre estimates that about four crore salaried individuals and pensioners will benefit if they opt to file their income tax returns under the new regime.
Salaried income taxpayers shifting to the new tax regime stand to save up to ₹17,500 in income tax, finance minister Nirmala Sitharaman announced in presenting the Union budget 2024. Two changes were made to the new tax regime to make it more attractive for the salaried and encourage more individuals to migrate from the old regime. The finance minister announced increased standard deduction for those opting to file their tax returns under the new regime and also widened the tax slabs to give relief. The government has also announced similar relief on family pension – pensioners opting for the new regime will be allowed an enhanced deduction of ₹25,000 against ₹15,000 allowed until the financial year 2023-14. The government estimates that about four crore salaried individuals and pensioners will benefit if they opt to file their income tax returns under the new regime.
Also read: What Budget 2024 has for Bihar and Andhra Pradesh
HT explains how the changes benefit salaried taxpayers.
Increase in the standard deduction
Salaried taxpayers opting for the new tax regime with effect from this financial year (or assessment year 2025-26) will be allowed to claim a standard deduction of ₹75,000 against ₹50,000 allowed until this year. This will help the salaried lower their tax burden. The standard deduction is allowed to the salaried class of taxpayers to enable them to offset various expenses that they incur such as transport. It was fixed at ₹50,000 in 2019-20 for all salaried taxpayers. This amount is deducted from the annual salary before calculating taxable salary. Those continuing with the old tax regime will be allowed a deduction of ₹50,000.
Also read: Budget 2024: Rent has to be declared under ‘income from house property’ tax head
Changes in the tax slabs
The finance bill has widened the tax slabs under the new tax regime for incomes below ₹10 lakh. While this will give relief to everyone opting for the new tax regime, smaller taxpayers may benefit more.
The changes have been announced in the slabs that attract income tax of 5%, 10% and 15%. Taxable income up to ₹3 lakh will continue to be exempt from income tax, as is the case under the new regime currently. The 5% slab has been widened from 3-6 lakh to ₹3-7 lakh. This will translate into a saving of ₹5,000 in income tax for anyone with taxable income of more than ₹6 lakh. The 10% slab has been widened from ₹6-9 lakh to ₹7-10 lakh. Those with taxable income of more than ₹9 lakh will benefit from this change, as this will translate into a saving of another ₹5,000.
The 15% has been widened from ₹9-12 lakh to ₹10-12 lakh. The 20% slab and the 30% slab are unchanged – taxable income between ₹12 lakh and ₹15 lakh will be taxed at 20% and any income above ₹15 lakh will be taxed at 30%.
Consider a person with an annual salary of ₹20 lakh. His taxable salary with the enhanced standard deduction will be ₹19.25 lakh against ₹19.50 lakh with a standard deduction of ₹50,000. Following the tweak in the tax slabs and increased standard deduction under the new tax regime, his tax liability will reduce from ₹2,85,000 to ₹2,67,500, resulting in a saving of ₹17,500 that the finance minister mentioned in her speech.
