The tax slabs under the New Regime have been amended in the Budget 2024, giving taxpayers an additional chance to save Rs 17,500 on taxes. Furthermore, under this regime, the family pension deduction has been raised from Rs. 15,000 to Rs. 25,000 and the standard deduction has been raised to Rs. 75,000. This will be applicable for the fiscal year 2024-2025.
Lower tax rates under the new tax regime (NTR) have been adopted in the Union Budget 2024, which was announced by Finance Minister Nirmala Sitharaman on Tuesday. This suggests that the old tax regime will be gradually phased out.
The most recent revisions might save salaried taxpayers up to ₹17,500. In any case, the tax liability computed under the previous tax regime is higher than that of the new tax regime, which imposes lower tax rates on the same gross income.
A number of suggestions have been made by economists regarding the best ways to spend the RBI’s excess funds in the budget. The majority of the surpluses have been utilized to reduce the fiscal deficit ratio, which for FY25 is currently 4.9%. Thus, it would seem that the budget was based on financial restraint. The government will find it simpler to meet its goal of 4.5% next year as a result.
All of the segments have received their allocations. The entire expenditure is essentially the same as it was in the interim budget. The primary focus of the job creation target is MSMEs, housing, and agricultural and rural development, all of which have received funding.
Highlights and Announcements of the Income Tax Budget for 2024
In her Union Budget 2024 speech, Finance Minister Nirmala Sitharaman highlighted modifications to the new income tax regime. Among those modifications were an increase in the standard deduction and new income tax brackets for FY 2024–2025.
There was an increase in the standard deduction from Rs 50,000 to Rs 75,000. Additionally, the Rs 5 lakh tax slab limit for the 5% tax rate was raised to Rs 7 lakh. The capital gains tax system underwent a comprehensive revision, resulting in an increase in tax rates. Anticipatedly, because the government seeks to promote the new income tax regime, no modifications to the current one were declared.
Budget 2024: Revised Income Tax Slabs
- Under the new tax regime, the lowest tax slab climbed from Rs 2.5 lakh to Rs 3 lakh.
- 5% tax for the Rs. 3–7 lakh slab.
- 10% tax on the Rs. 7–10 lakh slab.
- 15% tax on the Rs. 10–12 lakh slab.
- 20% tax for the Rs. 12–15 lakh slab.
- 30% tax over Rs. 15 lakh.
According to the revised tax slabs, income below Rs 3 lakh will be taxed at 0%, income between Rs 3 and Rs 7 lakh is 5% and between Rs 7 and Rs 10 lakh and 10%, income between Rs 10 and Rs 12 lakh and 15%, income between Rs 12 and Rs 15 lakh and 20%, and income beyond Rs 15 lakh will be taxed at 30%.
Previously, there was no tax under the new income tax regime for income up to Rs 3 lakh, 10% tax on income between Rs 6 and Rs 9 lakh, 15% tax on revenue between Rs 9 and Rs 12 lakh, 20% on income between Rs 12 and Rs 15 lakh, and 30% tax on income above Rs 15 lakh.
Middle-class taxpayers are likely to benefit greatly from these modifications.
Additionally, the government raised the 10% to 14% deduction cap for employers’ National Pension System (NPS) contributions.
Additionally, it is suggested to raise the family pension deduction from Rs. 15,000 to Rs. 25,000, which will help about 4 crore salaried people and pensioners.
Slab of Income Tax on Individuals
For General Category up to 60 Years
| Old Tax Regime | New Tax Regime | ||
| Income Slab | Income Tax Rate | Income Slab | Income Tax Rate |
| Up to Rs. 2,50,000 | Nil | 0 – Rs. 3,00,000 | Nil |
| Rs. 2,50,001 – Rs. 5,00,000 | 5% above Rs. 2,50,000 | Rs. 3,00,000 – Rs. 7,00,000 | 5% |
| Rs. 5,00,001-Rs. 10,00,000 | Rs. 12,500 + 20% above Rs. 5,00,000 | Rs. 7,00,000 -Rs. 10,00,000 | 10% |
| Above Rs. 10,00,000 | Rs. 1,12,500 + 30% above Rs. 10,00,000 | Rs. 10,00,00 – Rs. 12,00,000 | 15% |
| Rs. 12,00,000 – Rs. 15,00,000 | 20% | ||
| Above Rs. 15,00,000 | 30% | ||
A Comparison of Tax Rates for the Old and New Tax Regimes
| Old Tax Regime (FY 2022-23 and FY 2023-24) | New Tax Regime | ||||
| Income Slabs | Age < 60 years & NRIs | Age of 60 Years to 80 years | Age above 80 Years | FY 2022-23 | FY 2023-24 |
| Up to ₹2,50,000 | NIL | NIL | NIL | NIL | NIL |
| ₹2,50,001 – ₹3,00,000 | 5% | NIL | NIL | 5% | NIL |
| ₹3,00,001 – ₹5,00,000 | 5% | 5% | NIL | 5% | 5% |
| ₹5,00,001 – ₹6,00,000 | 20% | 20% | 20% | 10% | 5% |
| ₹6,00,001 – ₹7,50,000 | 20% | 20% | 20% | 10% | 10% |
| ₹7,50,001 – ₹9,00,000 | 20% | 20% | 20% | 15% | 10% |
| ₹9,00,001 – ₹10,00,000 | 20% | 20% | 20% | 15% | 15% |
| ₹10,00,001 – ₹12,00,000 | 30% | 30% | 30% | 20% | 15% |
| ₹12,00,001 – ₹12,50,000 | 30% | 30% | 30% | 20% | 20% |
| ₹12,50,001 – ₹15,00,000 | 30% | 30% | 30% | 25% | 20% |
| ₹15,00,000 and above | 30% | 30% | 30% | 30% | 30% |
How Can Income Tax Be Calculated Using Income Tax Slabs?
The total taxable income of Rohan is Rs 8,00,000. All sources of income, including salaries, rental income, and interest income, were taken into account while calculating this income. Section 80 deductions have also been decreased. According to the previous system, Rohit is interested in knowing his tax obligations for FY 2023–2024 (AY 2024–2025).
| Income Tax Slabs | Tax Rate | Tax Amount |
| *Income up to Rs 2,50,000 | No tax | – |
| Income from Rs 2,50,000 – Rs 5,00,000 | 5% (Rs 5,00,000 – Rs 2,50,000) | Rs 12,500 |
| Income from Rs 5,00,000 – 10,00,000 | 20% (Rs 8,00,000 – Rs 5,00,000) | Rs 60,000 |
| Income more than Rs 10,00,000 | 30% | – |
| Tax | Rs 72,500 | |
| Cess | 4% of Rs 72,500 | Rs 2,900 |
| Total tax in FY 2023-24 (AY 2024-25) | Rs 75,400 | |
Take Note:
Please be aware that Rohan is an individual taxpayer assessee with a Rs. 2,50,000 income tax exemption. The income-tax threshold for senior persons and super senior citizens, who are other taxpayer assessees, is Rs 3,00,000 and Rs 5,00,000, respectively, in order to qualify for the exemption.
Under the previous tax structure, taxpayers who had net taxable income of less than or equal to Rs 5 lakh would be entitled to a tax rebate under Section 87A, meaning they would have no tax burden.
Implications of Not Filing the Return by the AY 2024–2025 Due Date
The taxpayer will have to choose concessional rates in the New Tax regime. But the individual will also have to give up some of the exemptions and deductions available in the current Old Tax system if the return is not filed by the deadline for FY 2023–2024.
There are a total of 70 exemptions and deductions that are prohibited; the most often utilized ones are outlined below:
| Particulars | Old Tax Regime | New Tax regime (until 31st March 2023 | New Tax Regime (From 1st April 2023) |
| Income level for rebate eligibility | ₹ 5 lakhs | ₹ 5 lakhs | ₹ 7 lakhs |
| Standard Deduction | ₹ 50,000 | – | ₹ 50,000 |
| Effective Tax-Free Salary income | ₹ 5.5 lakhs | ₹ 5 lakhs | ₹ 7.5 lakhs |
| Rebate u/s 87A | 12,500 | 12,500 | 25,000 |
| HRA Exemption | ✓ | X | X |
| Leave Travel Allowance (LTA) | ✓ | X | X |
| Other allowances including food allowance of Rs 50/meal subject to 2 meals a day | ✓ | X | X |
| Entertainment Allowance Deduction and Professional Tax | ✓ | X | X |
| Perquisites for official purposes | ✓ | ✓ | ✓ |
| Interest on Home Loan u/s 24b on self-occupied or vacant property | ✓ | X | X |
| Interest on Home Loan u/s 24b on let-out property | ✓ | ✓ | ✓ |
| Deduction u/s 80C (EPF|LIC|ELSS|PPF|FD|Children’s tuition fee etc) | ✓ | X | X |
| Employee’s (own) contribution to NPS | ✓ | X | X |
| Employer’s contribution to NPS | ✓ | ✓ | ✓ |
| Medical insurance premium – 80D | ✓ | X | X |
| Disabled Individual – 80U | ✓ | X | X |
| Interest on education loan – 80E | ✓ | X | X |
| Interest on Electric vehicle loan – 80EEB | ✓ | X | X |
| Donation to Political party/trust etc – 80G | ✓ | X | X |
| Savings Bank Interest u/s 80TTA and 80TTB | ✓ | X | X |
| Other Chapter VI-A deductions | ✓ | X | X |
| All contributions to Agniveer Corpus Fund – 80CCH | ✓ | Did not exist | ✓ |
| Deduction on Family Pension Income | ✓ | X | ✓ |
| Gifts up to Rs 50,000 | ✓ | ✓ | ✓ |
| Exemption on voluntary retirement 10(10C) | ✓ | ✓ | ✓ |
| Exemption on gratuity u/s 10(10) | ✓ | ✓ | ✓ |
| Exemption on Leave encashment u/s 10(10AA) | ✓ | ✓ | ✓ |
| Daily Allowance | ✓ | ✓ | ✓ |
| Transport Allowance for a specially-abled person | ✓ | ✓ | ✓ |
| Conveyance Allowance | ✓ | ✓ | ✓ |
New Tax Regime vs. Old Tax Regime? Which is Good to Go?
Those in the middle class with taxable incomes up to Rs 15 lakh stand to gain the most from the new tax system. High earners would be better off under the previous system.
Those who invest little benefit from the new income tax scheme. Any individual paying taxes without claiming tax deductions may profit from paying a lower rate of tax under the new tax regime, which offers six lower-income tax slabs. Under the previous system, an assessee with total income up to Rs. 12 lakh before deductions would have a larger tax burden if they had investments of less than Rs. 3,12,500.
Choose the new regime instead of tax-saving plans if you invest less in them.
Having said that, the previous system benefits you with larger tax deductions and lower tax outgo if you already have a financial strategy in place for building wealth through investments in tax-saving instruments, health insurance and life insurance, paying for children’s education, making educational loan EMI payments, purchasing a house with a home loan, and so forth.
If taxpayers wish to choose the concessional tax rates, they can assess both regimes in accordance with the aforementioned information and the new income tax system.
Because this can differ from person to person, it is best to do a comparison evaluation and analysis under both regimes before selecting the most advantageous one.
When Can One Choose the Old Regime vs. the New One?
| Nature of Income | When to Choose Between the Old and New Regimes |
| Salary income or any other type of income that qualifies for TDS
|
An employee can choose the tax regime and notify their employer at the beginning of the fiscal year; otherwise, the new tax regime will be implemented by default. It cannot be changed while the year is running. You can change the selection, though, when you file your income tax return. |
| Income from Business & Profession | You can only choose between tax regimes once in your lifetime if you have business or professional income. |
What is the Amount of Tax Someone Has to Pay if His/Her Income is 20 lakh?
New Regime: 3,12,000
Old Regime: 4,29,000
The assumption used to calculate these taxes is that they represent net taxable income following the deduction of all amounts. To determine the precise amount of tax due, you can, however, enter your precise income information into this straightforward income tax calculator. Make sure you choose the right financial year if you are calculating for FY 2023–2024.
Does Filing Returns for AY 2024-2025 Require Someone to Choose the New Tax Regime?
It is up to the taxpayer to choose which tax system they want to use. If they need to use the old regime in order to claim deductions, exemptions, and losses, they must file their income tax returns by choosing not to use the new regime.
Employees must make this decision at the start of the year, although it is changeable when completing their ITR. Nevertheless, you can only choose to convert to the old tax regime once in your lifetime. We advise you to thoroughly compare your tax liability under the two regimes and then decide which is most advantageous to you.
Which Deductions Under the New Tax Regime are Allowed?
Under the new tax regime for FY 2023–2024, a few specific deductions can be claimed, including a standard deduction of Rs. 50,000, interest on a home loan under Section 24b on rental property, employer-paid NPS contributions under Section 80CCD, contributions to the Agniveer Corpus Fund under Section 80CCH, and a deduction for family pension income (the lower of 1/3rd of the actual pension or Rs. 15 000).
Is the HRA Exemption Applicable to the New Tax Regime?
No, the new tax regime does not permit the HRA exemption under s. 10(13A). In addition, the majority of claimed exemptions—including Leave Travel Allowance (LTA), Exemption on Voluntary Retirement 10(10C), Exemption on Gratuity u/s 10(10), Exemption on Leave Encashment u/s 10(10AA), Daily Allowance, Transport Allowance for a Specially Abled Person, Conveyance Allowance, etc.—are also NOT allowed.