Union Budget income taxes: In the first Budget of the Modi 3.0 government, Finance Minister Nirmala Sitharaman introduced many important changes to income taxes. The most prominent was the tweaking of tax slabs and increase in Standard Deduction limit under the New Tax Regime.
However, she didn’t introduce any change in the Old Tax Regime. After presenting the Budget, when FM Sitharaman was asked about the old tax regime, she said: “There is no decision yet on when the old tax regime will be scrapped.”
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“Can’t take a call on whether the old tax regime will be done away with… can only say the intention is to make the tax regime simpler,” she said. “Can’t say if there will be a sunset on the old regime.”
To enhance the financial status of the middle class, FM Sitharaman announced a rise in the standard deduction to Rs 75,000 from Rs 50,000, alongside minor adjustments to the tax slabs in the New Tax Regime. These modifications are set to result in an annual tax advantage of up to Rs 17,500 for individual taxpayers opting for the New Tax Regime.
The Old Tax Regime has been kept unchanged in the 2024-25 Union Budget, while the adjustments in the New Tax Regime are perceived as an additional incentive to encourage more salary earners to embrace this streamlined tax system. In recent years, the government has been striving to position the straightforward and exemption-free NTR as the preferred tax structure for individuals earning a salary.
Under the old regime, the tax rates were:
0% for income up to Rs 5 lakh
15% for income between Rs 5 and 7.5 lakh
20% for income between Rs 7.5 and 10 lakh
30% for income above Rs 10 lakh
The tax slabs under the new income tax regime were revised in the Budget 2024 for FY25. Under the revised tax structure, individuals earning up to Rs 3 lakh annually will be exempt from paying any income tax. Those earning between Rs 3 lakh and Rs 7 lakh will be subjected to a 5% income tax rate, while individuals with an income ranging from Rs 7 lakh to Rs 10 lakh will face a 10% tax rate. Those falling in the income bracket of Rs 10 lakh to Rs 12 lakh will be required to pay a 15% tax, and individuals earning between Rs 12 lakh and Rs 15 lakh will be taxed at a rate of 20%. Any income exceeding Rs 15 lakh will attract a flat 30% tax rate.
The new tax rates are expected to offer savings to taxpayers, with an individual earning up to Rs 10 lakh potentially saving Rs 10,000 in taxes by choosing the new tax regime. Previously, individuals in the same income bracket were liable to pay Rs 57,500 in taxes, whereas under the new system, they will only pay Rs 47,500.
The new tax income tax slabs under the New Tax Regime will be effective from April 1,2024, once the Budget is passed by Parliament and receives Presidential assent.
Revised tax slabs under New Tax Rate:
0% tax for income between Rs 0 and 3 lakh
5% for income between Rs 3 and 7 lakh
10% for income between Rs 7 and 10 lakh
15% for income between Rs 10 and 12 lakh
20% for income between Rs 12 and 15 lakh
30% for income above Rs 15 lakh