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Income Tax Slab and Tax Rate: Finance Minister Nirmala Sitharaman did not give any major relief on the income tax front as expected in her seventh budget, but arranged for minor concessions for those who choose the new tax system. In the new tax system, a proposal was made in the budget to increase the standard deduction by 50 percent to Rs 75,000 and change the tax slab. Similarly, there is also a proposal to increase the deduction on family pension for pensioners from Rs 15,000 to Rs 25,000. Nirmala Sitharaman said that more than two-thirds of the individual taxpayers have opted for the new tax in the financial year 2023-24. More than 8.61 crore income tax returns were filed in the last financial year. The new slabs announced in the budget today will be effective from April 1, 2024 (assessment year 2025-26).
In his budget speech, the Finance Minister claimed that the changes made in the income tax slabs in the new tax system and increasing the standard deduction from 50 thousand to 75 thousand will save taxpayers about Rs 17,500 and the government will lose revenue of 7 thousand crores. He said that four crore salaried and pensioners will benefit from this. Those who are following the old tax system do not seem to get any benefit.
New tax regime: New slabs
| Income Tax Slabs | Income Tax Rates |
| Upto Rs.3,00,000 | Zero |
| Rs.3,00,001 – Rs.7,00,000 | 5% |
| Rs.7,00,001 – Rs.10,00,000 | 10% |
| Rs.10,00,001 – Rs.12,00,000 | 15 % |
| Rupee. 12,00,001 – 15,00,000 | 20% |
| Above Rs 15 lakh | 30% |
The Finance Minister said that in the new tax system, the standard deduction for the salaried class is being increased from Rs 50,000 to Rs 75,000. Apart from this, as before, there will be no tax up to Rs 3 lakh, 5% tax on Rs 3 to 7 lakh, 10% on income of Rs 7 to 10 lakh, 15% on income of Rs 10 to 12 lakh, 20% on income of Rs 12 to 15 lakh and 30% tax on income of more than Rs 15 lakh. Apart from this, the limit of deduction in family pension has been increased from Rs 15,000 to Rs 25,000.
Nothing has changed in the old tax system
There has been no change in the old tax system. The old slabs and old rates will remain the same. In the old tax system, there was no tax on income up to Rs 2.5 lakh. After this, 5% tax is levied on income from Rs 2.5 lakh to Rs 5 lakh, 20% on income from Rs 5 lakh to Rs 10 lakh and 30% on income above Rs 10 lakh. However, many tax saving instruments have been exempted in the old tax system.
| Income Tax Rates | New tax rate | Old tax rate |
| Up to Rs 2,50,000 | Zero | |
| Rs.2,50,001 – Rs.5,00,000 | 5 % | |
| Rs.5,00,001 – Rs.10,00,000 | 20% | |
| Above Rs 10 lakh | 30 |
What changes have happened in NPS?
The employer's contribution to the New Pension Scheme (NPS) is proposed to be increased from 10 per cent to 14 per cent of the employee's salary. Similarly, it is proposed to provide for deduction of expenditure up to 14 per cent of the salary from the income of employees opting for the new tax regime in the private sector, public sector banks and public sector undertakings. The Finance Minister said that the Income Tax Act, 1961 will be comprehensively reviewed. It is proposed to merge the two tax exemption systems for charitable institutions into one. Similarly, the five per cent TDS rate on multiple payments is being reduced to two per cent TDS rate. “The budget proposes to reduce the TDS rate on e-commerce operators from one per cent to 0.1 per cent. Along with this, it is proposed to give the benefit of the amount of TCS in the calculation of TDS deducted on salary.