Income Tax 2024: More relief for salaried taxpayers this Budget, should you move to New Tax Regime?

Union Budget 2024: Finance Minister Nirmala Sitharaman on Tuesday tabled the Union Budget 2024-25 in the Parliament on Tuesday, wherein she introduced some changes to the direct taxes. 

FM Sitharaman made notable adjustments in the Income Tax Regulations to benefit the middle-class sector. One significant change is the 50% increase in the Standard Deduction, now at Rs 75,000. Additionally, modifications in tax slabs have been implemented in the new income tax structure to help increase disposable income for salaried individuals, thus encouraging higher spending.

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After the latest tweaks to the New Tax Regime, salaried workers can potentially save up to Rs 17,500 annually on income tax as per the Union Budget amendments. The Standard Deduction for salaried employees has been revised from Rs 50,000 to Rs 75,000 per year. Furthermore, there is a proposal to elevate the family pension deduction for pensioners from Rs 15,000 to Rs 25,000.

The new slabs under the New Tax Regime look like this:

> Rs 0-3 lakh: Nil (unchanged)
> Rs 3-7 lakh: 5% (vs 5% for Rs 3-6 lakh before)
> Rs 7-10 lakh: 10% (vs 10% for Rs 6-9 lakh before)
> Rs 10-12 lakh: 15% (vs 15% for Rs 9-12 lakh before)
> Rs 12-15 lakh: 20% (unchanged)
> Above Rs 15 lakh: 30% (unchanged) 

Should you then migrate to the New Tax Regime to save more?

Adhil Shetty of Bankbazaar.com told Business Today: “The revised New Regime proves to be a bigger deterrent to staying on in the old regime. While the Old Regime has more deductions that encourage investing and insuring, the tax brackets are also much higher. To keep your taxes as low as the new regime, you need to have significant deductions. If you have an income of Rs 15.6 lakh or more, you will need deductions of Rs 4.84 lakh to have a tax liability equal to or lower than the revised new regime. Even at lower income ranges, the new regime proves to be more beneficial as the higher rebate means people with a taxable income of up to Rs 7.5 lakh are exempt from taxes, compared to a taxable income of up to Rs 5 lakh in case of the old regime.”

“The Finance Minister tweaked slab rates slightly for the new tax regime, however, keeping the highest slab at Rs 15 lakhs like before. Moreover, the Standard Deduction for the New Tax Regime was increased to Rs 75,000 from Rs 50,000 earlier. However, there is no change in the Old Tax Regime, whatsoever, further signalling that the Government might be looking to phase out the old tax regime in near future. The question now becomes which tax regime might be better for you as an individual taxpayer. That depends on the deductions you are claiming. Are you claiming full HRA? Are you investing the full amount under section 80C? Do you have an education loan? Do you have a home loan? Are you paying for medical insurance? If the answer to all or most of the above is Yes, then for most of the higher income levels, old tax regime may continue to be better for you. However, if none of the above deductions are applicable to you, then you may consider getting into, or continuing, New Tax Regime,” said Vaibhav Jain, Head of Business – Equities, Share.Market.

Old Tax Regime

It is to be noted that the Old Tax Regime has not been tweaked this time. For Old Regime, a tax rebate up to Rs 12,500 is applicable if the total income does not exceed Rs 5,00,000 (not applicable for NRIs).

Income tax slabs (Rs) Income tax rates (%)
From 0 to 2,50,000          0%
From 2,50,001 to 5,00,000   5%
From 5,00,001 to 10,00,000  20%
From 10,00,001 and above    30%

The tax rates under both regimes are: