Income Tax Slab Budget 2024: Finance Minister Nirmala Sitharaman today presented the Union Budget 2024 in Parliament. The interim budget, which was Sitharaman’s 6th consecutive Budget, as it was presented months ahead of the Lok Sabha polls.
Budget 2024: No changes in tax slabs
No changes were proposed in the tax slabs under both the tax regimes. The full budget is scheduled for presentation in July, after the new government post-Lok Sabha elections takes oath. Finance Minister Sitharaman had previously indicated that there would be no major announcements in the interim budget due to the imminent polls in April-May. In the 2023 Budget, the Narendra Modi Government introduced several changes pertaining to income tax. A noteworthy change in personal taxation included designating the new income tax regime as the default option. However, citizens retain the choice to opt for the benefits offered by the old tax regime.
Income up to Rs 3 lakh will remain tax free, but under 87A, tax exemption up to Rs 7.5 lakh
The government has not given any relief in income tax to the common man in the interim budget. If you choose the old tax regime, your income up to Rs 2.5 lakh will still remain tax free. However, under Section 87A of the Income Tax Act, you can save tax on income up to Rs 5 lakh.
On choosing the new tax regime, you will not have to pay tax on income up to Rs 3 lakh like before. In this also, under Section 87A of the Income Tax Act, salaried persons can get tax exemption on income up to Rs 7.5 lakh and others can get tax exemption on income up to Rs 7 lakh.
Understand the old tax regime with an example
According to a tax expert, suppose someone’s annual income is Rs 5 lakh. In the old tax regime, income up to Rs 2.5 lakh is tax free. In such a situation, the person will be liable to pay tax at the rate of 5% on the remaining Rs 2.5 lakh. That means, he will have to pay tax of Rs 12,500. But the government waives this tax under Section 87A of the Income Tax Act.
There is also a catch in it. If your earning is more than Rs 5 lakh by even one rupee, then you will have to pay tax not on one rupee but on Rs 2.5 lakh. Now the tax liability at the rate of 5% on Rs 2.5 lakh will be Rs 12,500. On the remaining Rs 1, tax will have to be paid at the rate of 20%. That means, tax of Rs 12,501 will have to be paid.
Understand the new tax regime with an example
Suppose, if someone’s annual income is Rs 5 lakh. In the new tax regime, income up to Rs 3 lakh is tax free. In such a situation, the person will be liable to pay tax at the rate of 5% on the remaining Rs 2 lakh. That means, he will have to pay tax of Rs 10,000. But in this regime, the government waives tax on income up to Rs 7.5 lakh under Section 87A.
There is a catch in this also. If you are salaried and your earning is more than Rs 7.5 lakh by even one rupee, then you will have to pay tax not on one rupee but on Rs 4,50,001. Now after waiving the tax of Rs 3 lakh, out of the remaining Rs 4,50001, Rs 15,000 will have to be paid at the rate of 5% on Rs 3 lakh and Rs 15,000 at the rate of 10% on the remaining Rs 1,50,001.
That means the total tax liability will be Rs 30,000. Here let us also tell you that people who are not salaried get the benefit of tax deduction only on the amount up to Rs 7 lakh. In the new tax system, salaried people get the separate benefit of standard deduction of Rs 50,000, hence their income up to Rs 7.5 lakh becomes tax free.
Difference between old and new tax regime, new option given in 2020
There are two options for filing income tax return. A new option was given on 1 April 2020. In the new tax slab, the range of tax free income was increased from Rs 2.5 lakh to Rs 3 lakh, but tax deductions were taken away. At the same time, if you choose the old tax slab, you can take advantage of many types of tax deductions.
