Income Tax Slabs Rate 2024-25 Highlights: New Tax Regime made more attractive for small taxpayers with revised tax slabs, higher Standard Deduction | No changes in Old Tax Regime

In the Union Budget 2024-25, Finance Minister Nirmala Sitharaman has announced comprehensive review of the Income Tax Act. The FM has proposed easing taxation norms for individuals and entities. An income tax cut is expected in the Budget, which could help taxpayers save money and have more disposable income at their disposal.

The Federation of Automobile Dealers Associations (FADA) seeks from FM Sitharaman in this Budget 2024 the introduction of vehicle depreciation benefits for individual taxpayers. The body argues that this move would not only broaden the taxpayer base but also stimulate demand for automobiles. FADA has requested the finance minister to consider reducing corporate tax rates for LLPs, proprietary firms, and partnership firms in its wishlist.

India Inc joined the call for tax relief for the middle class in the upcoming budget. Industry leaders emphasize the need for income tax reductions in the lowest income brackets, urging Finance Minister Nirmala Sitharaman to address these concerns in the Modi 3.0 government’s maiden budget. Reducing income tax rates could potentially uplift India’s sluggish consumption levels and boost corporate profits and overall economic growth.

In this budget 2024, the Modi government may streamline the TDS process for property transactions involving Non-Resident Indians (NRIs) sellers. Currently, buyers purchasing property valued at Rs 50 lakh or more from NRIs face some complex requirements. These problems are related to higher TDS rates, the mandatory need to obtain a Tax Deduction and Collection Account Number (TAN), deposit the deducted tax, and file an e-TDS return. Introducing a unified challan-cum-statement, similar to what is used for resident sellers, could simplify this process, ease administrative burdens, and reduce the proliferation of inactive TANs in the future.

Big personal taxation changes are expected from the Modi government in this budget. Will FM Nirmala Sitharaman announce merger of the two tax regimes into one? It’s highly unlikely that the government will move towards scrapping the old tax regime altogether in the budget, according to experts. However, they anticipate additional tax incentives under the new tax regime to attract more taxpayers. Experts believe that merging the old tax regime into the new one at this juncture isn’t opportune. Such a decision would necessitate careful consideration of factors like revenue implications, sectoral impacts, and transition arrangements, which are crucial for any significant tax reform.

Employee organizations have expressed concerns about disparities in the new pension scheme. Their concern is that the new pension system creates income discrepancies among employees retiring from the same organization with similar years of service. They argue that having two pension systems also results in blatant discrimination among employees working together. Additionally, these employees oppose the NPS, citing that it reduces their take-home salary by 10%.

Government employees have been demanding the restoration of the Old Pension Scheme (OPS) ever since the New Pension System (NPS) was implemented in 2004. There are expectations that in the budget the Finance Minister may announce some positive developments for government employees. However, the restoration of OPS is unlikely. According to media reports, the government may propose a pension equal to 50% of the last-drawn salary for government employees.

In her budget speech, Finance Minister Nirmala Sitharaman is expected to increase health insurance provisions for senior citizens under the old tax regime. Currently, seniors without health insurance can claim up to Rs 50,000 deduction under Section 80D for medical expenses incurred. It is proposed that the finance minister should allow deductions for both health insurance premiums and medical expenses, providing crucial financial support. This adjustment will remove the burden of routine medical costs not covered by insurance, such as consultation fees and investigations, on senior citizens’ finances.

FM Nirmala Sitharaman in the Union Budget 2024-25 may announce a revision in the deduction limit for interest earned on savings bank accounts, currently capped at Rs 10,000 per year under Section 80TTA of the Income-tax Act. This provision allows individuals under 60 years and Hindu Undivided Families (HUFs) to claim a deduction on interest income from savings accounts held with banks, cooperative societies, or post offices. The revision is anticipated to provide additional tax relief to taxpayers. It should be noted that Section 80TTA deduction is not available if a taxpayer opts for the new tax regime during the financial year.

In budget 2024, there are also expectations from FM Nirmala Sitharaman regarding a potential reduction in the age limit for income tax return (ITR) exemption. Under Section 194P of the Income Tax Act, individuals aged 75 years or older may qualify for exemption from filing income tax returns provided they meet specific criteria. This includes being categorized as a ‘Resident’ for the relevant financial year and having income exclusively from pension and interest sources. This measure is intended to simplify tax compliance for senior citizens whose income is derived solely from pensions and interest earnings. To make it easier for older adults to manage their taxes, the proposal suggests extending this provision to individuals aged 60 years and above.

In a memorandum to Finance Minister Nirmala Sitharaman ahead of the Union Budget 2024, the direct tax practitioners’ body urged the government to ease the income tax burden on citizens. Their proposal seeks taxing income between Rs 5 lakh to Rs 10 lakh at 10% income tax rate, income between Rs 10 lakh to Rs 20 lakh at 20%, and income above Rs 20 lakh at 25% rate. They also recommended removing the surcharge and cess, arguing that their continuation is no longer justified. These tax practitioners also emphasized that the government should transparently explain how the education cess is utilized.

In a memorandum to Finance Minister Nirmala Sitharaman ahead of the Union Budget 2024, the direct tax practitioners’ body urged the government to ease the income tax burden on citizens. Their proposal seeks taxing income between Rs 5 lakh to Rs 10 lakh at 10% income tax rate, income between Rs 10 lakh to Rs 20 lakh at 20%, and income above Rs 20 lakh at 25% rate. They also recommended removing the surcharge and cess, arguing that their continuation is no longer justified. These tax practitioners also emphasized that the government should transparently explain how the education cess is utilized.

As per the present provisions of section 208 of the IT Act regarding advance tax, every person whose estimated tax liability for the year is Rs 10,000 or more is liable to pay advance tax. The said threshold limit of Rs 10,000 for payment of advance tax was last amended by Finance Act, 2009. In the Union Budget 2024, FM Sitharaman should focus on increasing the threshold limit of payment of Advance Tax from Rs 10,000 to Rs 30,000, urges CA Dr. Suresh Surana.

In wake of the increasing inflation in the Indian economy over the last 14 years, there is a need to increase the present threshold limit of Rs 10,000 to Rs 30,000, he said adding that this will help to reduce undue compliance burden for sole proprietors with small business enterprises, he added.

The government may consider increasing deductions on health insurance premiums for senior citizens in the budget 2024. The current limit of Rs 50,000 under section 80D is expected to be raised to at least Rs 1 lakh, according to experts. If the FM listens to taxpayers on this demand, they will be greatly relieved amid rising healthcare costs. It will also improve access to medical services for elderly individuals. The last time the government made changes to the 80D limit was in the Union Budget 2015. Expectations are high this time that the Centre might provide relief to taxpayers by increasing deduction limits, including those for 80D.

In accordance with the Income Tax Act, if any person receives any property on or after 1 April 2017, without consideration or for consideration which is less than the aggregate fair market value by an amount exceeding Rs 50,000, the difference shall be subjected to tax under the head ‘Income from Other Sources’ in the hands of the recipient, says CA Dr. Suresh Surana. The existing threshold limit of Rs 50,000 under this section was last revised in the Budget 2006. Thus, considering the inflation and increased cost of living, the threshold limit should be enhanced to Rs 1,50,000 in the Union Budget 2024-25.

Finance Minister Nirmala Sitharaman may consider raising the long-term capital gains exemption limit for senior citizens from Rs 1 lakh to Rs 2 lakh. This likely change may offer senior citizens greater financial flexibility, reduce their tax liability on capital gains, and encourage sustained investment in financial markets. If the base exemption limit for capital gains tax is increased to Rs 3 lakh for senior citizens and Rs 5 lakh for super senior citizens. As a result, individuals aged 60 years or above with an annual income of up to Rs 3 lakh, and those aged 80 years or older with a yearly income of up to Rs 5 lakh, will be exempt from capital gains tax.

An income tax cut is expected in the Budget, which could help taxpayers save money and have more disposable income at their disposal. In addition to this, the possibility of raising the basic tax exemption limit for all taxpayers, including senior citizens, will help individuals across various income brackets. As a result, this would stimulate economic activity through increased consumer spending and savings. This move is expected to provide financial relief to a broad segment of taxpayers, potentially enhancing economic growth through higher consumption levels.

The Union Budget is expected to focus on employment generation, rationalizing the tax rates, increase in limits for basic tax exemption, standard deduction, medical expenses, rationalization of tax rates and certain social security investments, says CA Dr. Suresh Surana.

The Modi government has not revised tax slabs under any of the tax regimes for the last few years and it is anticipated that FM Sitharaman would increase the Standard Deduction limit under the new tax regime to Rs 1 lakh from the current Rs 50,000 and also increase the basic tax exemption limits to Rs 5 lakh from the current Rs 3 lakh.

The finance minister may announce a big relief for taxpayers earning Rs 10 lakh to Rs 20 lakh in her budget presentation. Under the proposed changes in the tax structure expected to be announced during FM Sitharaman’s 2024 budget presentation, incomes ranging from Rs 10 lakh to Rs 20 lakh may face a 20% tax rate under the new tax regime. Experts are of the view that this will help maintain a progressive tax system while providing relief to taxpayers in this income bracket. The move will affect a significant number of taxpayers falling within the Rs 10 lakh to Rs 20 lakh income range.

During her budget presentation in 2024, Finance Minister Nirmala Sitharaman may announce significant revisions to tax slabs, including an increase in the income thresholds. Under the changes sought, the new tax regime could feature a 10% tax rate for incomes ranging from Rs 5 lakh to Rs 10 lakh. This adjustment is expected to impact the largest segment of taxpayers falling between the Rs 5 lakh and Rs 10 lakh income range.

Experts are of the view that the government going ahead may merge the old tax regime with the new tax regime and continue with a single taxation framework with a leaner structure with limited exemptions and deduction benefits for taxpayers. In union budget 2020, the Modi government introduced the new tax regime without any deduction and exemption benefits but with different tax slabs and low tax rates.

If the government announces an increase in the basic tax exemption limit in this union budget, there is a likelihood that the Tax Rebate policy too will be revised to align it with tax slabs. The introduction of the new tax regime has seen a significant rise in the rebate limit. Previously, under the old tax regime, the rebate limit was Rs 12,500 for incomes up to Rs 5 lakh. However, in the new tax regime, this limit was raised to Rs 25,000 for taxable incomes up to Rs 7 lakh. It’s important to note that the Section 87A rebate applies to both income tax regimes. Now, with standard deduction of Rs 50,000 and Tax Rebate of Rs 7 lakh under the new tax regime, individuals earning up to Rs 7.5 lakh are not paying any income tax.

In this Union Budget 2024, it is expected that FM Nirmala Sitharaman will give major tax relief to middle class taxpayers who are battling price rise and other economic difficulties. Among those hoping for tax breaks in the budget 2024 are senior citizens also. Hopes are high that the Modi government will increase the basic exemption limit for senior citizens. Currently set at Rs 3 lakh under both the old and new tax regimes, experts feel that the government may raise the basic tax exemption limit for senior citizens to Rs 10 lakh under a new, simplified exemption structure. This adjustment will ease the burden on senior citizens who often earn interest income between Rs 5-6 lakh from bank or post office deposits.

Taxpayers have sought the basic tax exemption limit to be raised to Rs 5 lakh in the union budget FY 2024-25, aiming to reduce the tax burden on the people. This adjustment would bring the new regime in line with the old, which remains popular due to exemptions such as HRA and 80C deductions. If the government aligns these benefits between both regimes, this could simplify decisions for taxpayers and increase the adoption of the new tax regime. Experts also recommend expanding deductions in the new regime to include employee contributions to EPF, NPS under Section 80CCD(1B), and medical insurance premiums under Section 80D.

In this budget, there is likely to be a big announcement on central government pensioners. The FM may announce a guaranteed pension equivalent to 50% of the last-drawn salary of the employee under the NPS. Reports suggest that the decision might be taken in the backdrop of proposals to scrap the National Pension System altogether and reintroduce the Old Pension Scheme (OPS). Under the OPS, central government staff are given a lifelong pension of 50% of their last-drawn salary, adjusted with Pay Commission recommendations. In FY16, a unique additional deduction for NPS investments was introduced, allowing taxpayers to claim an extra deduction under Section 80CCD (1B) of the Income-tax Act for contributions up to Rs 50,000 in their NPS Tier I account. Unlike other investment avenues, which only qualify for deductions under Section 80C, this provision offers an exclusive Rs 50,000 benefit for NPS.

Finance Minister Nirmala Sitharaman, in the first budget of the Modi 3.0 government, may announce major incentives for taxpayers, particularly those opting for the new tax regime. The 80C deduction benefits are likely to be extended to the new tax regime in the upcoming budget. Currently, the Section 80C benefit is not available under the default new tax regime. It is expected that this benefit will be extended to incentivize more taxpayers to opt for the new regime. The government should increase the 80C Deduction limit under the old tax regime from Rs 1.5 lakh to Rs 2 lakh, taxpayers demand. The last revision to the 80C limit was done in 2014, when then Finance Minister Arun Jaitley raised it from Rs 1 lakh to Rs 1.5 lakh.

In this budget, the middle-class is expecting Nirmala Sitharaman to hike the 80C deduction benefits to Rs 2.5 lakh from the existing Rs 1.5 lakh under the old tax regime. The taxable income of a taxpayer is calculated by subtracting the eligible Section 80C deductions from his or her gross total income. If the government makes any change in the Section 80C deduction cap, it will directly impact the taxable income of individuals as well as their tax liability. With inflation soaring, the Section 80C benefit has not kept pace. With the current limit under Section 80C set at Rs 1.5 lakh, many individuals quickly exhaust the limit and pay higher tax. This is why increasing the Section 80C limit would help taxpayers and the FM should give this demand a top priority, experts opine.

Taxpayers currently receive tax deduction benefits under Section 80C, with up to Rs 1.5 lakh available in deductions. This limit, widely expected to increase in the upcoming budget, was last raised to Rs 1.5 lakh annually by then Finance Minister Arun Jaitley in 2014. This change was a major form of relief in the government’s first budget. However, there have been no adjustments to the 80C limit since then, marking a decade since the last increase.

FM Sitharaman is expected to announce significant tax relief measures under the new tax regime in Budget 2024 to reduce the tax burden on small taxpayers. Based on some calculations, individuals earning up to Rs 8.5 lakh could end up paying no income tax. However, those earning up to Rs 10 lakh may not see much benefit, as they would still pay Rs 55,000 in tax compared to the current Rs 57,500. Currently, there is a tax rebate of 5% on income up to Rs 7 lakh and a standard deduction of Rs 50,000. These projections assume that the basic exemption limit under the new tax regime will increase to Rs 5 lakh and that the standard deduction of Rs 50,000 will remain available.

Currently, the new tax regime provides only a standard deduction benefit of Rs 50,000, without other deductions and exemptions available under the old tax regime. In the upcoming budget, significant changes in the tax structure, including an increase in the standard deduction under the new tax regime, are anticipated. While the standard deduction was already available under the old tax regime, experts suggest the government may also raise the basic tax exemption limit under the new regime from Rs 3 lakh to Rs 5 lakh annually. If implemented, this change would significantly alter the tax benefits for taxpayers.