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In Budget 2024, Finance Minister Nirmala Sitharaman has made two announcements for those opting for the new tax regime. First, the standard deduction for salaried employees is proposed to be increased from Rs 50,000 to Rs 75,000. Also the tax structure in the new tax regime has been proposed to be revised.
It is to be noted that the new tax regime was introduced in Budget 2020. While it had a more simplified tax structure, most of the popular deductions like those under Section 80C and 80D were not available under the new tax regime, which is why only very few opted for the new tax regime. In the subsequent years, the FM has introduced further changes to the new tax regime to give taxpayers an incentive to adopt the new tax regime.
"With 58 per cent of tax revenue now coming from the new regime, more taxpayers are opting for simplicity. The government has made it even more attractive by increasing the standard deduction from Rs 50,000 to Rs 75,000,” says Abhishek Soni, CEO, Tax2Win, an income tax portal.
Tax Structures Before The Budget
Income Tax Slab (Rs.) | Old Tax Regime | New Tax Regime (Applicable for FY 2023-24 (AY 2024-25) |
0 - 2,50,000 | - | - |
2,50,001 - 3,00,000 | 5% | - |
3,00,001 - 5,00,000 | 5% | 5% |
5,00,001 - 6,00,000 | 20% | 5% |
6,00,001 - 7,50,000 | 20% | 10% |
7,50,001 - 9,00,000 | 20% | 10% |
9,00,001 - 10,00,000 | 20% | 15% |
10,00,001 - 12,00,000 | 30% | 15% |
12,00,001 - 12,50,000 | 30% | 20% |
12,50,001 - 15,00,000 | 30% | 20% |
More than 15,00,000 | 30% | 30%
|
Source: Tax2Win
Proposed Tax Structure under The New Tax Regime In Budget 2024
In the new tax regime, the tax rate structure is proposed to be revised, as follows:
0-3 lakh rupees - NIL tax
3-7 lakh rupees - 5% tax
7-10 lakh rupees - 10% tax
10-12 lakh rupees - 15% tax
12-15 lakh rupees - 20% tax
Above 15 lakh rupees - 30% tax
“Revised tax slabs now benefit the middle class and pensioners, with a 5 per cent rate for incomes between Rs 3-7 lakh and 10 per cent for Rs 7-10 lakh, saving up to Rs 17,500 more. 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,” says Soni.
However, as had been expected by many, the FM did not increase the deductions under section 80C, so as such there was no incentive for taxpayers who have decided to stay with the old tax regime.
