To offer greater tax relief than the previous tax system, the Union Budget 2024 proposed a new set of tax slabs.
People might be curious about how to figure out which tax system is best for them. The choice will be based on the precise deductions that each taxpayer is eligible to take to guarantee that their tax obligation was lower under the previous system than it is under the current one.
It should be noted that the Old Tax Regime's income tax laws, slabs, and rates have not changed. The New Tax Regime did, however, undergo certain modifications.
The proposed changes under the new tax regime include:
> Adjustments to the income tax slabs in the New Tax Regime
> An increase in the standard deduction limit to Rs 75,000 from Rs 50,000, resulting in a Rs 25,000 raise
> An increase in the standard deduction available to family pensioners to Rs 25,000 from Rs 15,000, resulting in a Rs 10,000 raise
> An increase in the deduction on the employer's NPS contribution to the employee's account to 14% from the previous 10% limit.
The new income tax slabs announced in the Budget 2024 are as follows:
Up to Rs 3 lakh - 0%
Rs 3 lakh to Rs 7 lakh - 5%
Rs 7 lakh to Rs 10 lakh - 10%
Rs 10 to Rs 12 lakh - 15%
Rs 12 to Rs 15 lakh - 20%
Above Rs 15 lakh - 30%
The overall goal of the New Tax Regime's updated tax slabs is to lessen the tax burden on people earning up to Rs 10 lakh in taxable income. Income between Rs 6-7 lakh would be taxed at 5% under the proposed new tax system, while income between Rs 9-10 lakh would be taxed at 10%. This will save Rs 5,000 in taxes.
Additionally, the standard deduction has been increased to Rs 75,000, which means that income up to Rs 7.75 lakh is tax-free. It is anticipated that salaried taxpayers will gain Rs 7,500 from this adjustment. In this case, the tax payment under the previous tax regime would have been around Rs 59,800 if the taxable income was Rs 7,75,000 and just a standard deduction applied. However, there won't be any tax due in this case under the new tax scheme.
Under the proposed new tax system, a salaried employee with a total income of Rs 16 lakh will, after standard deduction, have taxable salary income of Rs 15.5 lakh for FY 2023-24 and Rs 15.25 lakh for FY 2024-25.
Under the present new tax regime, the tax due for FY 2023–2024 will be Rs 1.65 lakh, while under the proposed new tax system for FY 2024–2025, it will be Rs 1,47,500. Under the present new tax system and the proposed new tax regime, the total tax amount, including e-cess, will be Rs 1,71,600 and Rs 1,53,400, respectively.
Only the basic deduction of Rs 75,000 is taken into account for tax computation under the planned new tax system that was established in Budget 2024.
On the other hand, the previous tax system considered a basic deduction of Rs 50,000 in accordance with income tax regulations.
The HRA tax exemption, LTA tax exemption, Section 80C, Rs 50,000 NPS investment deduction, Section 80D deduction, and other allowable deductions that the taxpayer may claim are examples of additional deductions beyond the statutory deduction of Rs 50,000.
To get the same amount of tax in both tax regimes, the following minimum deductions, often referred to as break-even levels, must be claimed at different income levels under the prior tax system.
People might be curious about how to figure out which tax system is best for them. The choice will be based on the precise deductions that each taxpayer is eligible to take to guarantee that their tax obligation was lower under the previous system than it is under the current one.
It should be noted that the Old Tax Regime's income tax laws, slabs, and rates have not changed. The New Tax Regime did, however, undergo certain modifications.
The proposed changes under the new tax regime include:
> Adjustments to the income tax slabs in the New Tax Regime
> An increase in the standard deduction limit to Rs 75,000 from Rs 50,000, resulting in a Rs 25,000 raise
> An increase in the standard deduction available to family pensioners to Rs 25,000 from Rs 15,000, resulting in a Rs 10,000 raise
> An increase in the deduction on the employer's NPS contribution to the employee's account to 14% from the previous 10% limit.
The new income tax slabs announced in the Budget 2024 are as follows:
Up to Rs 3 lakh - 0%
Rs 3 lakh to Rs 7 lakh - 5%
Rs 7 lakh to Rs 10 lakh - 10%
Rs 10 to Rs 12 lakh - 15%
Rs 12 to Rs 15 lakh - 20%
Above Rs 15 lakh - 30%
The overall goal of the New Tax Regime's updated tax slabs is to lessen the tax burden on people earning up to Rs 10 lakh in taxable income. Income between Rs 6-7 lakh would be taxed at 5% under the proposed new tax system, while income between Rs 9-10 lakh would be taxed at 10%. This will save Rs 5,000 in taxes.
Additionally, the standard deduction has been increased to Rs 75,000, which means that income up to Rs 7.75 lakh is tax-free. It is anticipated that salaried taxpayers will gain Rs 7,500 from this adjustment. In this case, the tax payment under the previous tax regime would have been around Rs 59,800 if the taxable income was Rs 7,75,000 and just a standard deduction applied. However, there won't be any tax due in this case under the new tax scheme.
Under the proposed new tax system, a salaried employee with a total income of Rs 16 lakh will, after standard deduction, have taxable salary income of Rs 15.5 lakh for FY 2023-24 and Rs 15.25 lakh for FY 2024-25.
Under the present new tax regime, the tax due for FY 2023–2024 will be Rs 1.65 lakh, while under the proposed new tax system for FY 2024–2025, it will be Rs 1,47,500. Under the present new tax system and the proposed new tax regime, the total tax amount, including e-cess, will be Rs 1,71,600 and Rs 1,53,400, respectively.
Only the basic deduction of Rs 75,000 is taken into account for tax computation under the planned new tax system that was established in Budget 2024.
On the other hand, the previous tax system considered a basic deduction of Rs 50,000 in accordance with income tax regulations.
The HRA tax exemption, LTA tax exemption, Section 80C, Rs 50,000 NPS investment deduction, Section 80D deduction, and other allowable deductions that the taxpayer may claim are examples of additional deductions beyond the statutory deduction of Rs 50,000.
To get the same amount of tax in both tax regimes, the following minimum deductions, often referred to as break-even levels, must be claimed at different income levels under the prior tax system.
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