The Economic Survey 2023-24 was recently unveiled on the inaugural day of the monsoon session of Parliament, setting the stage for the imminent presentation of the seventh Union Budget 2024-25 by Finance Minister Nirmala Sitharaman. Anticipation looms over potential announcements concerning income tax, including possible adjustments to exemption and standard deduction limits.
Current Taxation Structures
In the Budget 2023, Finance Minister Nirmala Sitharaman introduced modifications to the income tax landscape. The income tax exemption limit was elevated by Rs 50,000 to reach Rs 3 lakh, while the rebate under Section 87A of the Income Tax Act, 1961, was amplified from Rs 5 lakh to Rs 7 lakh. Notably, individuals earning up to Rs 7 lakh were exempted from tax liabilities under the new regime.
Income Tax Rates for FY 2023-24 (AY 2024-25):
| Income Tax Slab (in Rs) | Old Tax Regime | New Tax Regime |
|---|---|---|
| 0-2,50,000 | 0% | 0% |
| 2,50,001-3,00,000 | 5% | 0% |
| 3,00,001-5,00,000 | 5% | 5% |
| 5,00,001-6,00,000 | 20% | 5% |
| 6,00,001-9,00,000 | 20% | 10% |
| 9,00,001-10,00,000 | 20% | 15% |
| 10,00,001-12,00,000 | 30% | 15% |
| 12,00,000-15,00,000 | 30% | 20% |
| 15,00,0001 & Above | 30% | 30% |
Note: For senior citizens (above 60 years), income tax under the old regime is exempt up to Rs 3,00,000, while for super senior citizens (above 80 years), income up to Rs 5,00,000 is exempt. Furthermore, a 4% health and education cess is levied on income tax.
Taxpayers have the prerogative to opt for either the old tax regime or the new tax regime, with the default scheme being the new tax regime.
Under the new tax regime, resident individuals with a net income not exceeding Rs 7 lakh are eligible for a rebate under section 87A, amounting to 100% of income tax or Rs 25,000, whichever is lower. Conversely, under the old tax regime, resident individuals with a net income up to Rs 5 lakh can avail a rebate under section 87A, capped at 100% of income tax or Rs 12,500, whichever is lower.
Anticipated Reforms in Union Budget 2024-25
Vivek Jalan, partner at Tax Connect Advisory Services LLP, predicts a shift towards a ‘Single Hybrid Tax Regime’ following the widespread adoption of the new tax regime by new taxpayers. It is anticipated that the exemption slab in the new regime may be extended from the current Rs 3 lakh to at least Rs 4 lakh.
Moreover, established taxpayers with an income surpassing Rs. 15 lakhs are expected to persist in the old regime. To incentivize their transition to the New Regime, a new tax slab within the new regime, such as Rs 15 lakh — Rs 18 lakh with a tax rate of 25%, may be introduced.
Furthermore, rationalization of the slabs in the new tax regime for individuals, HUFs, etc., is envisaged to broaden the tax base and facilitate the government’s progression towards a more exemption-free regime. Although this may entail a sacrifice in exchequer’s revenue, it is poised to promote the organized sector, diminish the unorganized sector, stimulate consumption, bolster GDP growth, and foster employment generation to meet escalating demands. Additionally, an augmentation of the standard deduction for salaried taxpayers is anticipated, fostering increased cash flow and advocating economic growth.
Stay updated with our comprehensive coverage of Union Budget 2024 for the latest updates pertaining to new income tax slab rates for AY 2024-25.
This synthesized information aims to provide a comprehensive understanding of the Union Budget 2024-25 and the potential adjustments in income tax regulations, ensuring individuals are well-prepared for the forthcoming fiscal year.
