As the new financial year is on the corner, the Union Budget’s Income Tax proposals will also come into effect from 1st April 2024. Finance Minister Nirmala Sitharaman announce these changes during her Budget speech earlier in February 2024.
Lets dive into overview of some significant changes, including expanded basic exemption limits, among many others, that you should know about.
- The default adoption of the new tax regime is a significant change aim at simplifying the tax filing process and encouraging more taxpayers to opt for the new regime, which offers lower tax rates but fewer deductions and exemptions. But, taxpayers still have the option to continue using the old tax regime if it proves to be more advantageous for them.
- As per the announcement made in the previous Budget, starting from 1st April, 2023, the basic exemption limit was raised to Rs 3 lakh from Rs 2.5 lakh under the new tax regime. Also, the rebate given under Section 87A of the Income Tax Act, 1961, was increase to Rs 7 lakh from Rs 5 lakh. Due to this, individuals with a taxable income of up to Rs 7 lakh under the new regime will receive a complete tax rebate, exempting them from paying any income tax.
According to the new regime, these are the tax slabs:
- Income from Rs 3 lakh to Rs 6 lakh: 5% tax rate
- Income from Rs 6 lakh to Rs 9 lakh: 10% tax rate
- Income from Rs 9 lakh to Rs 12 lakh: 15% tax rate
- Income from Rs 12 lakh to Rs 15 lakh: 20% tax rate
- Income exceeding Rs 15 lakh: 30% tax rate
- The standard deduction of Rs 50,000, which was previously only applicable to the old tax regime, but now extended to also cover the new tax regime. This adjustment will lead to a reduction in taxable income for individuals opting for the new regime.
- The surcharge rate, which previously were at 37% for incomes exceeding Rs 5 crore, has now decrease to 25%. This leads to a lower effective tax rate for individuals with substantial incomes who opt for the new regime.
- According to the statement made by the FM Nirmala Sitharaman, maturity proceeds from life insurance policies issue on or after 1st April, 2023, with a total premium exceeding Rs 5 lakh, will be liable for taxation.
- The tax exemption limit for leave encashment for non-government employees, previously Rs 3 lakh, has now raise to Rs 25 lakh.
