Union Budget 2024: Now pay ZERO tax if your income is up to Rs 7.75 lakh under the new tax regime

In a major relief to taxpayers, the Finance Minister in the Union Budget 2024 has introduced a new tax regime that allows individuals with income up to Rs 7.75 lakh to pay zero tax. This is a significant change from the previous regime, which offered tax benefits but with a more complex structure.

In last year's budget, the government said that salaried individuals would not have to pay any tax if the taxable income did not exceed Rs 7 lakh in a financial year. The maximum limit of rebate available under section 87A of the Income-tax Act, 1961 has been increased to Rs 25,000 from Rs 12,500. While experts are sceptical about the rebate amount, the government has kept the rebate unchanged as of now.

CA (Dr.) Suresh Surana said, “Currently, section 16(ia) of the IT Act allows for a standard deduction of Rs 50,000 when computing income under "Salaries". To encourage salaried taxpayers to opt for the new tax regime, the threshold limit for standard deduction limit has been proposed by Budget 2024 to be increased from Rs 50,000 to Rs 75,000. These changes will apply from Financial Year 2024-25 and onwards. Further, taxpayers opting for the concessional tax regime u/s 115BAC could avail the tax rebate u/s 87A, which would be restricted to lower of actual amount of basic tax or maximum amount of Rebate (i.e. Rs. 25,000). The rebate has been kept unchanged.”
 
Accordingly, the tax liability under the existing and proposed slab rates (under the new tax regime) would be as follows:

Thus, taxpayers opting for the new tax regime with total income of Rs. 7,75,000 would not be liable to pay any income tax.

The new tax regime is simpler and offers a lower tax burden for those who opt for it. However, it is important to note that certain deductions and exemptions available under the old regime are not available under the new one. Individuals should carefully consider their tax situation before deciding which regime is best for them.

Individuals can choose between the old and new tax regimes each year. It is advisable to consult a tax advisor to determine which regime is more beneficial based on your individual circumstances.