Budget 2024: Key Changes in Income Tax Slabs and Their Impact.

Income Tax Changes Under the New Regime.

The budget announcement has brought significant updates to income tax rates, directly affecting taxpayers. Finance Minister Nirmala Sitharaman has introduced notable changes in the new tax regime, which offers certain benefits compared to the old tax structure.

1. Tax Exemption for Lower Incomes: No tax will be levied on income up to ₹3 lakhs. For income between ₹3 lakhs and ₹7 lakhs, a 5% tax rate applies. Income between ₹7 lakhs and ₹10 lakhs will be taxed at 10%, while earnings from ₹10 lakhs to ₹12 lakhs are taxed at 15%. A 20% tax is imposed on income from ₹12 lakhs to ₹15 lakhs, and a 30% tax rate is applicable on income exceeding ₹15 lakhs.
2. Detailed Calculation Example: For instance, income up to ₹3 lakhs remains tax-free. The 5% tax on income from ₹3 lakhs to ₹7 lakhs means that for an income of ₹4 lakhs within this range, the tax is ₹20,000. However, under Section 87, this ₹20,000 tax is waived, resulting in no tax liability. With an additional standard deduction of ₹75,000, total income up to ₹7,75,000 becomes tax-free. According to the Finance Minister, this change could save up to ₹17,500 in taxes.

Old Tax Regime.

1. Unchanged Slabs: The old tax regime retains four tax slabs with no modifications:
   • Up to ₹2.5 lakhs: No tax
   • ₹2.5 lakhs to ₹5 lakhs: 5% tax
   • ₹5 lakhs to ₹10 lakhs: 20% tax
   • Above ₹10 lakhs: 30% tax
2. Tax Exemptions: Under the old regime, income up to ₹5 lakhs is effectively tax-free due to a ₹12,500 rebate under Section 87A. However, any income exceeding ₹5 lakhs disqualifies you from this rebate.

Choosing the Right Tax Regime.

• New Tax Regime: Offers a simplified tax structure with no exemptions. If your income is up to ₹7,75,000 and you do not invest in any tax-saving schemes, the new tax regime might be more advantageous.
• Old Tax Regime: Allows deductions for investments, health insurance, children’s school fees, house rent, and other expenses. If you make significant investments or incur expenses that qualify for deductions, the old tax regime might be more beneficial.

In summary, the new budget changes offer a simpler tax structure with potential savings for those who fit within its parameters. Evaluate your financial situation to determine which tax regime aligns best with your needs.