The budget 2024 is out and crypto investors were left wishing for more as Finance Minister Sitaraman did not make any changes to the taxation of Virtual Digital Assets (VDA).
Overall, the budget showed some tough love for equity investors, while salaried employees saw some relief as standard deduction increased and the tax slabs under the new regime were tweaked to benefit salaried individuals.
The budget had some major takeaways for agriculture and human development but was silent on crypto taxation in India.
Here are the revised tax rates under the new tax regime. Read on to learn more.
Overview of income tax slabs under the New Tax Regime for FY 2024-25
The new tax regime saw considerable changes as the low- and middle-income tax slabs were modified to increase the disposable income of salaried individuals.
Individuals filing their income tax under the new regime stand to get the benefit of up to Rs. 17,500 this year.
The table below displays a comparison of tax slabs between FY 2023-24 and FY 2024-25 for the new tax regime.
| FY 2023-24 Income Tax Slab | FY 2024-25 Income Tax Slab | Income Tax Rates |
| Up to Rs. 3 lakh | Up to Rs. 3 lakh | NIL |
| Rs.3 lakh – Rs.6 lakh | Rs.3 lakh – Rs.7 lakh | 5% |
| Rs.6 lakh – Rs.9 lakh | Rs. 7 lakh – Rs. 10 lakh | 10% |
| Rs.9 lakh – Rs.12 lakh | Rs. 10 lakh – Rs. 12 lakh | 15% |
| Rs. 12 lakh to Rs. 15 lakh | Rs. 12 lakh – Rs. 15 lakh | 20% |
| Above Rs. 15 lakh | Above Rs. 15 lakh | 30% |
From the tweaked tax rates above, we can see that salaried individuals opting for the new regime are likely to benefit from the lower tax rate.
Standard deduction revision for the New Tax Regime:
The standard deduction for the new tax regime was revised to make the new regime attractive for salaried taxpayers.
| Standard deduction 2023-24 | Standard deduction 2023-24 | Change |
| Rs. 50,000 | Rs. 75,000 | Rs. 25,000 |
The change in standard deduction will increase your tax-free income by Rs. 25,000 compared to the previous year.
Overview of income tax slabs under the Old Regime for FY 2024-25
There have been no changes made to the old tax regime in Budget 2024. The tax rates for the old regime as well as the standard dedication amount stay the same as last year.
In other words, taxpayers opting for the old regime will enjoy the same benefits as the year before.
The table below shows a comparison of tax slabs between FY 2024-25 and FY 2023-24 under the old tax regime.
| FY 2023-24 Income Tax Slab | FY 2024-25 Income Tax Slab | Income Tax Rates |
| Up to Rs. 2.5 lakh | Up to Rs. 2.5 lakh | NIL |
| Rs. 2.5 lakh – Rs.5 lakh | Rs. 2.5 lakh – Rs.5 lakh | 5% |
| Rs. 5 lakh – Rs.10 lakh | Rs. 5 lakh – Rs.10 lakh | 20% |
| Rs. 10 lakh and above | Rs. 10 lakh and above | 30% |
A comparison between old and new income tax regime
There are two different income tax regimes in India under which taxpayers can avail tax benefits. The new tax regime was introduced in Budget 2020 in addition to the existing old regime.
Taxpayers are free to choose between the two regimes. The individual needs to choose between the two tax regimes based on which offers the most favorable tax outcome. For example, those who wish to avail substantial deductions and exemptions may prefer the old regime to maximize tax benefits.
Lower-earning individuals as well as people looking for a straightforward tax regime might choose the new tax regime.
The new tax regime now has the benefit of higher standard deductions as compared to the old tax regime, with lower tax rates for lower and middle-income tax slabs. These changes in the budget 2024 might change your tax regime preference.
New income tax regime
Benefits of the new income tax regime:
- The new tax regime offers lower tax rates.
- Under the new regime, the tax exemption limit has been increased to ₹3 lakhs
- The new tax regime has a simpler tax structure.
- The new regime offers a higher standard deduction of Rs. 75,000 compared to Rs. 50,000 in the old regime.
Drawbacks:
- The new regime does not allow taxpayers to claim deductions and exemptions.
- The new tax regime offers limited tax planning opportunities.
Old income tax regime
Benefits of the old tax regime:
- The old scheme offers a wide range of deductions and exemptions.
- Taxpayers can invest in tax-saving instruments like PPF, NSC, and tax-saving fixed deposits.
Drawbacks:
- The old regime can appear complex due to numerous exemptions and deductions, requiring in-depth knowledge and meticulous record-keeping.
- The old regime has higher tax rates for different income slabs.
Tips for high earners to reduce taxable income
High earners have to pay higher taxes due to the progressive tax system where tax rates increase as an individual’s income rises. Consequently, high-income individuals incur a significant tax liability, which reduces the amount of money they can save. So, tax planning is crucial for individuals who belong to this income bracket.
Here are some effective ways for high earners to reduce their taxable income:
- Invest in Section 80C eligible products like PF, PPF, and ELSS, for a deduction of up to Rs 1.5 lakh from taxable income.
- Purchase health insurance to claim a deduction under Section 80D.
- Seek tax deductions on House Rent Allowance (HRA), if you receive it.
- Reduce taxable income by claiming deductions on home loan interest under Section 24, up to Rs 2 lakh.
- Save on taxes by keeping money in your savings account. Under Section 80TTA, savings account interest is tax-exempt up to Rs 10,000.
- Donate to government-approved charities to claim deductions in the range of 50%-100% of the donated amount under Section 80G.
- Staying informed about tax laws and keeping yourself updated on the latest changes in tax laws can be beneficial in tax planning.
In addition to changes to the personal income tax slabs, there were significant changes announced on the long-term and short-term capital gains tax front as well as a hike in STT and more. These changes require considerable reading and research on our part. We will do a detailed post for you after going through the Budget fine print in detail.
Conclusion
Income tax in India is calculated based on specific income tax slabs and rates outlined in the Union Budget for each financial year. For FY 2024-25, there are notable changes in income tax slabs, impacting the tax liability for individuals.
Tax planning should align with an individual’s financial goals and needs. One should do thorough research or consult tax experts to devise a comprehensive tax strategy to reduce tax liability.
FAQs
1. Do I need to file an income tax return if my annual income is below Rs.2.5 lakh?
You need not file an ITR if your yearly income is below Rs.2.5 lakh, but you should file a ‘Nil Return’ just for the record as you can produce it as proof of your employment. For instance, you can provide your ITR while applying for a loan or passport.
2. How is the income of a taxpayer classified?
Under Section 14 of the Income Tax Act, the taxpayer’s income has been classified under 5 different income heads: Salaried individuals, Capital gains, Gains/Profits from profession or business, Income from house property, and Income from other sources.
3. Does family pension come under salary income during taxation?
No, family pension will not be taxed under salary income but as ‘income from other sources.’
4. Who can claim a rebate under Section 87A?
Ans. Rebate under Section 87A can be claimed by any resident Indian whose total annual income is below Rs.5 lakh. The maximum available rebate under 87A is Rs.12,500.
5. Will my income be taxed if I am an agriculturist?
Any income which is generated from agriculture or allied activities is not taxed. However, it will be considered for calculating total tax if you have any non-agricultural income along with income from farming.
6. Is income up to Rs.5 lakh tax-free?
No, income up to Rs.5 lakh is not tax-free. However, individuals who earn an income of up to Rs.2.50 lakh in a financial year do not have to pay taxes.
7. Can I switch the income tax regime for my tax filing?
Yes, you can choose to file your income tax returns as per the old regime or the new regime as per your preference.
8. Are income tax slabs in India subject to change?
Yes, the income tax slabs in India are subject to changes.
9. Who makes changes to the income tax slabs in India?
The changes to the income tax slabs in India are proposed by the Ministry of Finance, government of India.
10. When are the changes to the income tax slabs in India proposed?
The changes to the income tax slabs in India are announced by the finance minister when the annual budget is presented every year in February.
