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If you are also a taxpayer and file income tax returns every year, then this news can make you happy. Like every year, this time too there is a demand for changes in the tax slab and increasing the limit under 80C to give relief to the salaried class. It is expected that this time the middle class can get relief from the government. According to the report published in Moneycontrol, the government is planning to increase the tax exemption limit from the current Rs 3 lakh to Rs 5 lakh under the new tax system in the budget to be presented in July.
Will the tax exemption limit increase?
The report quoted an official as saying that the government is considering increasing the tax exemption limit from the current Rs 3 lakh to Rs 5 lakh. This will only apply to those filing returns under the new tax system. However, the final decision on this will definitely be taken after the budget is presented. It will also be interesting to see how much the taxpayers will benefit if the government actually takes this decision.
New tax system
First let us try to understand the new tax system. The government first introduced the new tax regime in the 2022 budget. The rates of this tax regime are lower than the old tax regime. However, taxpayers do not get the benefit of many tax deductions and exemptions. Taxpayers have the option to choose between the old and new tax regime while filing their income tax returns.
Whereas under the old tax system, taxpayers get exemption on various types of investments, insurance, housing allowance and leave travel allowance etc. under various sections of the Income Tax Act. Also know the slabs of the new tax system.
Income Tax Slabs under New Tax Regime
3. Up to Rs. lakh – Nil
Between Rs 3 lakh and Rs 6 lakh – 5% (tax exemption under section 87A)
Between Rs 6 lakh and Rs 9 lakh – 10% (tax exemption up to Rs 7 lakh under section 87A)
Between Rs 9 lakh and Rs 12 lakh – 15%
Between Rs 12 lakh and Rs 15 lakh – 20%
Above Rs.15 lakh – 30%
Therefore, if the government gives tax exemption on income up to Rs 5 lakh in the next budget 2024-25, then instead of the existing 6 slabs, only 5 slabs will remain. While income from Rs 5 lakh to Rs 9 lakh will continue to get tax exemption under section 87A as before but the condition is that there will be no change in the slab or its rates.
what will be the benefit
If the tax exemption limit is increased from Rs 3 lakh to Rs 5 lakh in Budget 2024-25, then this will reduce the tax amount by Rs 10,400 (including 4 per cent health and education cess) for people with taxable income between Rs 7.6 lakh and Rs 50 lakh. While those whose taxable income is between Rs 50 lakh and Rs 1 crore, their tax liability reduces to around Rs 11,440 (including cess and 10 per cent surcharge). Apart from this, people with income from 1 crore to 2 crore can get a benefit of Rs 11960. While the tax liability of people with income more than 2 crore is reduced to Rs 13000.
