Union Budget 2024: Union Finance Minister Nirmala Sitharaman is scheduled to present the full Budget for the year 2024 in July. Taxpayers are eagerly awaiting potential reductions in tax rates and an increase in exemption limits.
In the Budget 2023, the BJP-led government announced various amendments to tax policies. One significant change was the increase in the basic exemption limit under the new tax regime, from Rs 2.5 lakh to Rs 3 lakh. Moreover, the government also reduced the surcharge rates for high-income earners in the same Budget.
How much tax do I have to pay? Calculate now
Ahead of the budget presentation on July 23, it has been reported that FM Sitharaman is considering introducing tax relief measures in a bid to stimulate consumption. Possibilities include rationalising the income tax slab for yearly incomes ranging from Rs 15 lakh to Rs 20 lakh in the new tax regime. Furthermore, rumors suggest that the current income exemption limit of Rs 3 lakh might be raised to Rs 5 lakh.
Moreover, experts anticipate that the government may increase the standard deduction limit from Rs 50,000 to Rs 1,00,000 under the New Tax Regime. Conversely, it is unlikely that the old income tax regime will undergo substantial changes, as the government aims to encourage more individuals to transition to the new income tax system.
Expected announcements
1. Tax-free income
If the hike in income tax exemption of Rs 5 lakh is implemented, it would indicate that individuals earning an annual income of up to Rs 8.5 lakh might be exempt from paying income tax. This estimation factors in the standard deduction and rebate under Section 87A, provided it stays the same, CA Satish Surana told the Financial Express.
Surana added that this decision could offer considerable assistance to middle-income earners, notably elevating the threshold for tax-free income and enhancing disposable income for numerous taxpayers.
It is to be noted that at present there is a tax rebate applicable to incomes of up to Rs 7 lakh, which could prove advantageous for individuals earning salaries up to Rs 7.5 lakh in accordance with the new system. Nonetheless, it is crucial to recognize that the current tax exemption threshold remains at Rs 3 lakh.
Accounting firm EY has proposed the idea to increase the basic exemption limit to Rs 5 lakh within the framework of the new tax regime. This proposed adjustment is envisioned to furnish taxpayers with additional disposable income, potentially offering financial relief to a wider spectrum of individuals.
Current tax slabs under New Tax Regime
Under the New Tax Regime, the exemption limit is Rs 3 lakh covers various components. It covers standard deduction of Rs 50,000 allocated to all taxpayers. Moreover, taxpayers can benefit from a tax rebate pursuant to Section 87A, allowing for a maximum relief of Rs 25,000 if the taxable income does not exceed Rs 7 lakh. Consequently, taking into account the standard deduction of Rs 50,000, the threshold for taxable income without tax liability extends to Rs 7.5 lakh.
Tax slabs Tax rate Up to Rs 3 lakh 0% Rs 3 lakh to Rs 6 lakh 5% (Tax rebate u/s 87A) Rs 6 lakh to Rs 9 lakh 10% (Tax rebate u/s 87A up to Rs 7 lakh) Rs 9 lakh to Rs 12 lakh 15% Rs 12 lakh to Rs 15 lakh 20% Above Rs 15 lakh 30%
If Rs 5 lakh is the exemption limit:
In the Rs 5 lakh scenario, following an enhanced exemption limit of Rs 5 lakh, the threshold for tax-free income has been substantially adjusted. The standard deduction continues to stand at Rs 50,000.
Furthermore, the tax rebate under section 87A must be considered, offering a relief of Rs 25,000 for individuals with a taxable income of Rs 8 lakh or below. This results in an effectively non-taxable income limit of Rs 8.5 lakh, incorporating the standard deduction of Rs 50,000.
Tax slabs (assumed under new tax regime) Tax rate Up to Rs 5 lakh 0% Rs 5 lakh to Rs 6 lakh 5% (Tax rebate u/s 87A) Rs 6 lakh to Rs 9 lakh 10% (Tax rebate u/s 87A on income up to Rs 8 lakh) Rs 9 lakh to Rs 12 lakh 15% Rs 12 lakh to Rs 15 lakh 20% Rs 15 lakh and above 30%