Union Budget 2024: Finance Minister Nirmala Sitharaman on Tuesday brought in some relief for the taxpayers under the New Tax Regime. After increasing the Standard Deduction limit from Rs 50,000 to Rs 75,000, FM Sitharaman revised the tax slabs for the New Tax regime. She said salaried employee will now stand up to save Rs 17,500 in income tax.
Taxpayers who belong to the highest tax bracket, defined as individuals with a taxable income of Rs 15 lakh or higher, are set to benefit from the increased standard deduction limit in the New Tax Regime. This enhancement will result in a savings of Rs 7,500 for these taxpayers. Furthermore, the rationalisation of tax rates will lead to an additional savings of Rs 10,000 for this specific group of taxpayers. Consequently, they can enjoy a total savings of Rs 17,500 due to these combined benefits.
Here are new tax slabs the New Tax Regime
Rs 0-3 lakh: Nil (unchanged) Rs 3-7 lakh: 5% (vs 5% for Rs 3-6 lakh before) Rs 7-10 lakh: 10% (vs 10% for Rs 6-9 lakh before) Rs 10-12 lakh: 15% (vs 15% for Rs 9-12 lakh before) Rs 12-15 lakh: 20% (unchanged) Above Rs 15 lakh: 30% (unchanged)
The base income tax benefit of Rs 17,500 announced by FM Sitharaman does not include the cess. It also doesn't include surcharge at higher income levels. As per the analysis conducted by Ernst & Young (EY), it has been determined that individuals will be exempt from paying taxes on income up to Rs 7.75 lakhs. Moreover, for those earning up to Rs 10 lakhs annually, there is a potential saving of Rs 10,000 before cess is applied. If the cess is factored in, the total benefit is expected to increase.
All taxpayers earning over Rs 12 lakh will benefit from a tax savings of Rs 10,000 due to the rate rationalization. However, the savings resulting from the standard deduction increase will vary based on the respective income groups. Taxpayers in higher tax brackets will experience lower savings compared to those in lower brackets, as the standard deduction savings are calculated in accordance with the applicable income tax rate, varying for different income brackets.
CA Pitam Goel, Co-Founder - Tattvam Group, said: “The benefits available for new tax regime for individuals has been further rationalised to encourage individuals to opt for new tax regime. The slab rates have been further rationalised to provide tax benefits of up to INR 17,500/-. The Government is making the new tax regime increasingly lucrative for individuals in the interest of carving a path towards a simpler tax mechanism.”
Further, certain benefits are offered: (i) increased standard deduction for salary income from 50,000 to 75,000
(ii) increase in deduction for employer and employee contribution to national pension scheme and
(iii) increased deduction for income from family pension
Are available only to individuals opting for new tax regime.
Surabhi Marwah, Tax Partner at EY India, said: “The changes in the new tax regime will benefit taxpayers. For instance, under Scenario 3, where the gross salary is Rs 20,00,000, the total tax payable under the current new tax regime amounts to Rs 2,96,400, whereas under the proposed new tax regime, the tax payable is reduced to Rs 2,78,200.”
Besides, Sitharaman also increased the tax deduction on family pensions for pensioners. While presenting the Union Budget 2024 in the Lok Sabha, the FM noted that the tax deduction is set to rise from the current Rs 15,000 to Rs 25,000.
Old Tax Regime
The FM has kept the Old Tax Regime untouched for now. Responding to a question on the old tax regime, Nirmala Sitharaman said, "We want a simpler tax regime. The new tax regime was introduced with the same intent. At present, the old regime is ongoing. However, I can't comment on the sunset of the old tax regime."
In the Old tax Regime, the basic exemption limit was set at Rs 2.5 lakh for individuals below 60 years of age. For senior citizens aged above 60 but below 80, the basic tax exemption limit was Rs 3 lakh. For super senior citizens aged 80 years and above, the basic tax exemption limit was Rs 5 lakh.
The old regime provides several deductions and exemptions for individuals, including house rent and leave travel allowances, as well as deductions under Sections 80C, 80D, 80CCD(1b) and 80CCD(2). However, these exemptions and deductions are not available in the new tax regime.
Revised Income Tax Slabs – Budget 2024
| New Income tax slabs (Rs) | New Tax Rate (%) | Old Income tax slabs | Old Tax Rate |
| From 0 to 3 lakh | Nil | From 0 to 3 lakh | Nil |
| From 3 to 7 lakh | 5% | From 3 to 6 lakh | 5% |
| From 7 to 10 lakh | 10% | From 6 to 9 lakh | 10% |
| From 10 to 12 lakh | 15% | From 9 lakh to 12 lakh | 15% |
| From 12 to 15 lakh | 20% | From 12 to 15 lakh | 20% |
| More than 15 lakh | 30% | More than 15 lakh | 30% |
Surcharges
Under the old and new tax regimes, a surcharge is imposed on the total income tax payable when a taxpayer's taxable income surpasses specific thresholds. If the taxable income exceeds Rs 50 lakh, a surcharge is applicable in both tax structures. It's important to note that there are varying surcharge rates based on different income brackets.
| Range of Income | Surcharge rate |
| Up to Rs 50 lakh | Zero |
| Rs 50 lakh- Rs 1 crore | 10% |
| Rs 1 crore -Rs 2 crore | 15% |
| More than Rs 2 crore | 25% |
Surcharge under Old Tax Regime
| Range of Income | Surcharge rate |
| Up to Rs to lakh | Zero |
| Rs 50 lakh- Rs 1 crore | 10% |
| Rs 1 crore -Rs 2 crore | 15% |
| Rs 2 crore-Rs 5 crore | 25% |
| More than Rs 5 crore | 37% |