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Every year 1st April marks the beginning of a new financial year and it is always important as most of the budget proposals on income tax come into effect from 1st April. It also impacts other individual finances making changes in other sectors of the market applicable from then as well. With the start of the new fiscal year 2024-2025, there are some noteworthy changes that have been made to India’s income tax regulations. These changes announced by India’s Finance Minister, Nirmala Sitharaman in her Budget speech, aim to simplify tax planning for the taxpayers of the country.
The government will implement the New Tax Regime as the default setting for taxpayers from 1st April, 2024. In simpler terms, it means that unless a taxpayer chooses to stick to the old tax structure, taxes will automatically be applied and cut according to the new system. Nirmala Sitharaman in her last budget announcement had said that taxpayers will get the option for opting for the old method. Along with that she also proposed to raise the rebate limit to ₹7 Lakhs from ₹5 Lakhs so someone who chose the new tax regime will not be required to pay any tax upto 7 lakh as the annual income.
What’s new in the New Tax Regime?
- Simplified Tax Planning:
Through the new tax regime, the taxpayers no longer need to have a record maintained when it comes to their rent receipts and travel tickets.
- Increased Basic Exemption Limit:
The basic exemption limit has been increased from ₹2.5 lakhs to ₹3 lakhs.
- Surcharge Rate Reduction:
The surcharge rate for individuals who have their income slabs exceeding ₹5 Crores has dropped down to 25% from 37%. It only applies to those taxpayers who choose to opt for the new tax regime.
- Rebate Limit Enhancement:
The rebate limit has increased under the new tax regime for people with income up to ₹7 lakhs annually. The applicable rebate limit is ₹25,000 now.
- Life Insurance Taxation:
The maturity proceeds from life insurance policies which are issued on or after 1st April, 2023 and wherever the total amount exceeds ₹5 lakhs will be taxed according to the announcement made by Nirmala Sitharaman, the Finance Minister of India.
- Exemption Of Enhanced Leave Encashment:
The leave encashment tax exemption limit has been increased to ₹25 lakhs from ₹3 lakhs for the non-government employees.
- Simplified Tax Planning:
Through the new tax regime, the taxpayers no longer need to have a record maintained when it comes to their rent receipts and travel tickets.
- Increased Basic Exemption Limit:
The basic exemption limit has been increased from ₹2.5 lakhs to ₹3 lakhs.
- Surcharge Rate Reduction:
The surcharge rate for individuals who have their income slabs exceeding ₹5 Crores has dropped down to 25% from 37%. It only applies to those taxpayers who choose to opt for the new tax regime.
- Rebate Limit Enhancement:
The rebate limit has increased under the new tax regime for people with income up to ₹7 lakhs annually. The applicable rebate limit is ₹25,000 now.
- Life Insurance Taxation:
The maturity proceeds from life insurance policies which are issued on or after 1st April, 2023 and wherever the total amount exceeds ₹5 lakhs will be taxed according to the announcement made by Nirmala Sitharaman, the Finance Minister of India.
- Exemption Of Enhanced Leave Encashment:
The leave encashment tax exemption limit has been increased to ₹25 lakhs from ₹3 lakhs for the non-government employees.
What are the new income tax slabs?
People with income between ₹ 3 lakh and ₹ 6 lakh will be taxed at 5%. People with income between ₹ 6 lakh to ₹ 9 lakh will be taxed at 10%. People with income between ₹ 9 lakh to ₹ 12 lakh will be taxed at 15%. People with income between ₹ 12 lakh to ₹ 15 lakh will be taxed at 20% tax and there will be a tax of 30% levied on people with income of ₹ 15 lakh and above.
Although the new tax regime which is to be implemented from 1st April, 2024 looks more appealing after the last budget, it does not include the standard deductions that were available under the old tax regime.
What are the unchanged income tax slabs?
Nirmala Sitharaman, the Union Finance Minister, while presenting the interim Budget on February 1, 2024, said that there will be no changes in taxation and had proposed to retain the same direct and indirect tax rates which would be including the import duties. She also added that the average time span for refunds has been brought down from 93 days to just 10 days in 2023 and the average income of people has increased by 50%.
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