Budget 2024 According to the Center, if four crore salaried people and retirees choose to file their income tax returns using the new system, they will stand to gain.
Finance Minister Nirmala Sitharaman stated during the presentation of the Union budget 2024 that taxpayers with salaried incomes who switch to the new tax system might save up to ₹17,500 in income tax. To improve the new tax regime’s appeal to salaried workers and entice more of them to switch from the previous one, two modifications were implemented. To assist, the finance minister expanded the tax slabs and raised the standard deduction for individuals choosing to submit their returns under the new system. Similar relief has also been announced by the government for family pensions; retirees who choose to use the new system will be able to deduct an additional ₹25,000 instead of the ₹15,000 that was previously permitted until the fiscal year 2023-2024. According to government estimates, over four crore salaried people and seniors who choose to file their income tax returns using the new system will benefit from it.
HT explains how the changes benefit salaried taxpayers by increasing the standard deduction.
With effect from this financial year (or assessment year 2025–26), salaried taxpayers who choose to adopt the new tax regime will be able to deduct ₹75,000 as opposed to the ₹50,000 that was previously permitted. This will lessen the tax burden for those on salaries. The standard deduction is granted to taxpayers in the salaried class so they can deduct a variety of expenses, including transportation costs. For all salaried taxpayers, it was set at ₹50,000 in 2019–20. The taxable salary is determined by subtracting this amount from the annual salary. A ₹50,000 deduction would be granted to those who continue to file under the previous tax system.
Changes in the tax slabs
For incomes under ₹10 lakh, the finance bill has expanded the tax slabs under the new tax regime. All taxpayers who choose the new tax regime would benefit from this, but smaller taxpayers might gain more.
The slabs that are subject to income taxes at the rates of 5%, 10%, and 15% have undergone revisions. As it is under the current new regime, taxable income up to ₹3 lakh would remain exempt from income tax. The range of the 5% slab is now ₹3-7 lakh instead of 3-6 lakh. For those with taxable income over ₹6 lakh, this will result in an income tax savings of ₹5,000. The 10% slab now covers ₹7–10 lakh instead of ₹6–9 lakh. Individuals with taxable income of more than ₹9 lakh will profit from this modification since it will result in an additional ₹5,000 in savings.
The 15% now includes ₹10–12 lakh instead of ₹9–12 lakh. The tax slabs of 20% and 30% remain the same; taxable income falling between ₹12 lakh and ₹15 lakh would be subject to a 20% tax rate, while income above ₹15 lakh would be subject to a 30% tax rate.
Imagine an individual earning ₹20 lakh per year. In comparison to ₹19.50 lakh with a standard deduction of ₹50,000, his taxable salary with the improved standard deduction will be ₹19.25 lakh. His tax burden will drop from ₹2,85,000 to ₹2,67,500 as a result of the adjustments made to the tax slabs and the enhanced standard deduction under the new tax regime. This will result in the ₹17,500 savings that the finance minister indicated in her address.
