In a significant move aimed at providing relief to salaried individuals, India’s Union Finance Minister Nirmala Sitharaman announced revisions to the income tax slabs under the New Tax Regime during the presentation of the Union Budget 2024. These changes are designed to offer considerable savings for taxpayers.
The revised tax slabs eliminate any tax liability for income up to Rs 3 lakh. For income between Rs 3 lakh and Rs 7 lakh, the tax rate is now set at 5%. The 10% tax bracket has also been expanded, now encompassing income up to Rs 10 lakh, which previously ended at Rs 9 lakh. Tax rates for other income brackets remain unchanged.
Adding to the benefits, the Finance Minister announced a hike in the standard deduction limit from Rs 50,000 to Rs 75,000, marking an increase of Rs 25,000.
Collectively, these changes can lead to substantial savings for salaried taxpayers, especially those in the 30% tax bracket. The estimated annual savings for such individuals can reach up to Rs 17,500 under the new tax regime.
To illustrate how this saving is calculated, let’s consider the impact of the revised slabs on specific income ranges:
1. For income between Rs 3 lakh and Rs 6 lakh, the current tax liability is Rs 15,000. With the new changes, the tax liability becomes Rs 20,000, resulting in an additional tax of Rs 5,000. This translates to a negative saving of Rs 5,000.
2. For income between Rs 9 lakh and Rs 12 lakh, the current tax liability is 15%, amounting to Rs 45,000. Under the new slabs, the tax liability for income between Rs 10 lakh and Rs 12 lakh is also 15%, bringing the tax amount down to Rs 30,000. This results in a total saving of Rs 15,000 (45,000 – 30,000).
3. Combining the savings from I and II, the total saving comes to Rs 10,000 (15,000 – 5,000).
4. Additionally, the standard deduction increase of Rs 25,000 for someone in the 30% tax bracket provides an additional saving of Rs 7,500 (30% of 25,000).
Summing up the savings from 3 and 4, the total estimated saving for a salaried taxpayer in the 30% tax bracket reaches Rs 17,500.
