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Finance Minister Nirmala Sitharaman has expectedly announced the income tax hike in the Union Budget 2024-25. The government has given relief to the middle class on this front, which will benefit the taxpayers under the new tax system announced in 2020.
What changes have happened on the income tax front…?
Under the new tax system of Income Tax, the Finance Minister has not only increased the standard deduction from ₹ 50,000 to ₹ 75,000, but has also made changes in the tax slabs. According to the new slab, income from zero to ₹ 3 lakh will attract zero income tax as before. After the change in the next slab, now only 5 percent tax will be levied on income from ₹ 3 lakh to ₹ 7 lakh, whereas till now only 5 percent tax was levied on income up to ₹ 6 lakh. Now 10 percent tax will have to be paid on income from ₹ 7 lakh to ₹ 10 lakh, whereas till now this slab was applicable on income from ₹ 6 lakh to ₹ 9 lakh. Now 15 percent tax will be levied on income from ₹ 10 lakh to ₹ 12 lakh, whereas till now 15 percent tax was levied on income from ₹ 9 lakh to ₹ 12 lakh. In the remaining slabs, 20 per cent tax will be levied on income from ₹12 lakh to ₹15 lakh as before and 30 per cent tax will be levied on income above ₹15 lakh as before.
Understand from the chart who will benefit how much…
Now we are telling you how much taxpayers earning how much will benefit from these changes. In the chart given below, we have taken examples of five such taxpayers, who earn ₹ 7,75,000, ₹ 10,75,000, ₹ 12,75,000, ₹ 15,75,000 and ₹ 18,75,000 every year respectively. Now see, what will be their income tax liability based on the standard deduction and slabs and rates existing till now and what will be the income tax liability based on the standard deduction and slabs and rates proposed during Budget 2024-25 on Tuesday. Finally, it is also told how much a person earning how much will benefit from the changes made in the budget.
A person earning ₹7,75,000 will get a benefit of ₹28,600
For a person who earns ₹7,75,000 every year, his taxable income, i.e. after the standard deduction of ₹50,000 available till now, is ₹7,25,000, and based on the current rules and tax rates, his income tax liability including health and education cess is ₹28,600. While after the announcement of increase in standard deduction, the taxable income of this person will be ₹7,00,000, and due to the exemption available under section 87A, his tax liability will be zero, and thus this person will get a benefit of ₹28,600.
A person whose income is ₹10,75,000 will also get the benefit
A person whose total income is ₹10,75,000 has a taxable income of ₹10,25,000 till date and his income tax liability is ₹66,300. After the increase in standard deduction, the taxable income of this person will be ₹10,00,000 and his income tax liability as per the new slab will also be ₹52,000, thus giving him a net benefit of ₹14,300.
A person whose annual income is ₹12,75,000 will get a benefit of ₹15,600
The third person in the chart has a total income of ₹12,75,000. Till now his taxable income was ₹12,25,000, and hence his income tax liability was ₹98,800. With the new rules, this person's taxable income will be ₹12,00,000, and with the new rates his income tax liability will be ₹83,200, giving this person a benefit of ₹15,600.
A person earning ₹15,75,000 will get a benefit of ₹18,200
The fourth person is earning ₹15,75,000 annually, and his taxable income so far has been considered as ₹15,25,000, due to which his income tax liability is ₹1,63,800. After the increase in standard deduction by ₹25,000, his taxable income will become ₹15,00,000, and his income tax liability as per the new slab will be ₹1,45,600, hence, he will get a benefit of ₹18,200.
A person earning ₹18,75,000 will also get a benefit of ₹18,200
A person earning ₹18,75,000 per annum has a taxable income of ₹18,25,000 after the current standard deduction of ₹50,000, which gives an income tax liability of ₹2,57,400. After the increase in standard deduction, his taxable income will be ₹18,00,000, which gives an income tax liability of ₹2,39,200, and this person will also get a benefit of ₹18,200.
