Budget 2024 New Income Tax Slabs and Rates Announced for FY 2024-25

Budget 2024 introduces new income tax slabs and rates, offering significant tax savings and increased standard deductions, effective April 1, 2024.

Key Points

• New income tax slabs announced in Budget 2024-25.
• Tax rates reduced, leading to savings up to Rs 17,500 for taxpayers.
• Standard deduction limit increased to Rs 75,000 for salaried individuals.
• New tax regime remains the default tax regime, effective April 1, 2024.
• Taxpayers can opt for the old tax regime, which offers multiple deductions and exemptions.

In the Union Budget 2024-25, Finance Minister Nirmala Sitharaman announced significant changes to the income tax slabs and rates under the new tax regime. These changes are aimed at providing tax relief and simplifying the tax structure for individual taxpayers, effective from April 1, 2024.

The new income tax slabs for FY 2024-25 are as follows:

• Up to Rs 3 lakh: 0%
• Rs 3 lakh to Rs 7 lakh: 5%
• Rs 7 lakh to Rs 10 lakh: 10%
• Rs 10 lakh to Rs 12 lakh: 15%
• Rs 12 lakh to Rs 15 lakh: 20%
• Above Rs 15 lakh: 30%

These adjustments are expected to lead to savings of up to Rs 17,500 for taxpayers opting for the new tax regime. Additionally, the standard deduction limit for salaried individuals has been increased from Rs 50,000 to Rs 75,000. For family pensioners, the standard deduction limit has been raised from Rs 15,000 to Rs 25,000.

The Finance Minister emphasized that these changes are part of the government’s efforts to make the tax system more taxpayer-friendly and to boost disposable incomes, thereby stimulating economic growth. The new tax regime remains the default option, but taxpayers can choose to opt for the old regime, which provides various deductions and exemptions.

Here’s a breakdown of the proposed changes compared to the current tax slabs:

Current Tax Slabs (FY 2023-24):

• Up to Rs 3 lakh: 0%
• Rs 3 lakh to Rs 6 lakh: 5%
• Rs 6 lakh to Rs 9 lakh: 10%
• Rs 9 lakh to Rs 12 lakh: 15%
• Rs 12 lakh to Rs 15 lakh: 20%
• Above Rs 15 lakh: 30%

Proposed Tax Slabs (FY 2024-25):

• Up to Rs 3 lakh: 0%
• Rs 3 lakh to Rs 7 lakh: 5%
• Rs 7 lakh to Rs 10 lakh: 10%
• Rs 10 lakh to Rs 12 lakh: 15%
• Rs 12 lakh to Rs 15 lakh: 20%
• Above Rs 15 lakh: 30%

The proposed changes expand the lower tax brackets, thereby providing relief to a broader range of taxpayers. The government aims to create a more inclusive and equitable tax environment that encourages compliance and reduces the tax burden on middle-income earners.

Vinita Krishnan, Executive Director – Direct Tax at Khaitan & Co., highlighted that the reduction in tax rates is particularly advantageous for foreign companies with established presences in India, such as bank branches and infrastructure companies with project offices in the country. The tax cut also benefits those generating short-term capital gains from unlisted shares/securities and other previously high-taxed income, irrespective of relief provided by applicable tax treaties.

As part of the budget, the Model Skill Loan Scheme will be revised to offer loans up to INR 7.5 lakh with government-guaranteed funds, expected to assist 25,000 students annually. Additionally, financial support for education loans up to INR 10 lakh for domestic institutions will be provided, with e-vouchers for annual interest subvention of 3% available to 1 lakh students each year.

These comprehensive measures reflect the government’s commitment to creating a robust job market and equipping the youth with the necessary skills for future opportunities. By making the tax system more efficient and taxpayer-friendly, the Union Budget 2024-25 aims to foster economic growth and improve the overall financial well-being of individuals.