Budget 2024: Here's how you're saving income tax of Rs 17,500 on your earnings

Finance Minister Nirmala Sitharaman has proposed significant changes to the new tax regime in Budget 2024 to make it more appealing while retaining the old tax structure. These changes could save taxpayers Rs 17,500 compared to the existing rates under the new tax regime.

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. Additionally, the standard deduction for salaried employees has been proposed to increase from Rs 50,000 to Rs 75,000.

As a result of the expansion in the tax slab of 5%, there is a tax saving of Rs 5,000 (Rs 1,00,000 * 5%). Similarly, on the expansion of the slab of 10%, there is an additional saving of Rs 5,000 (Rs 1,00,000 * 5%, where 5% is the differential between 15% and 10%). Adding Rs 7,500 savings at 30% due to increase in the standard deduction by Rs 25,000, the total calculation works out to Rs 17,500. 

"It appears that the Ministry is favouring the New Tax Regime without exemptions over the Old Tax Regime. By adjusting the tax rate slabs, the new tax regime becomes even more attractive, which is likely to result in more taxpayers opting for it over the old regime. A tax saving of Rs 17,500 would increase the disposable income for the salaried class, offering relief from the rising costs," said Neeraj Agarwala , Partner , Nangia & Co LLP.

"As a result of these changes, a salaried employee in the new tax regime stands to save up to Rs 17,500 in income tax," stated the Finance Minister during her budget speech.

Moreover, the deduction on family pension for pensioners is proposed to be increased from Rs 15,000 to Rs 25,000. This initiative aims to provide significant relief to approximately four crore salaried individuals and pensioners.

The proposed changes in the Budget 2024 are designed to make the new tax regime more appealing to a broader range of taxpayers. By adjusting the tax slabs and increasing standard deductions, the government aims to increase tax savings. With these adjustments, the government is signaling its commitment to new tax regime by offering more savings.