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- Income Tax Slabs 2024-25 Budget 2024 Highlights & Announcements: Standard deduction hiked, tax slabs changed - taxpayers will save Rs 17,500! Capital gains tax regime changed
Income Tax Slabs 2024-25 Budget 2024 Highlights & Announcements: Standard deduction hiked, tax slabs changed - taxpayers will save Rs 17,500! Capital gains tax regime changed
New income tax regime tax slabs are:
Up to Rs 3 lakh the tax is NIL
From Rs 3 lakh to Rs 7 lakh the tax rate is 5%
From Rs 7 lakh to Rs 10 lakh the tax rate is 10%
From Rs 10 lakh to Rs 12 lakh the tax rate is 15%
From Rs 12 lakh to Rs 15 lakh the tax rate is 20%
Above Rs 15 lakh income the tax rate is 30%
To improve social security benefits, deduction of expenditure by employers towards NPS is proposed to be increased from 10 to 14 per cent of the employee’s salary. Similarly, deduction of this expenditure up to 14 per cent of salary from the income of employees in private sector, public sector banks and undertakings, opting for the new tax regime, is proposed to be provided.
“Introduction of simplified tax regimes without exemptions and deductions for corporate tax and personal income tax. This has been appreciated by tax payers. 58 per cent of corporate tax came from the simplified tax regime in financial year 2022-23. Similarly, as per data available till now for the last fiscal, more than two-thirds have availed the new personal income tax regime,” said FM Sitharaman.
As a result of these proposals, revenue of about Rs 37,000 crore – Rs 29,000 crore in direct taxes and Rs 8,000 crore in indirect taxes – will be forgone while revenue of about Rs 30,000 crore rupees will be additionally mobilized. Thus, the total revenue forgone is about Rs 7,000 crore annually.
Track TOI’s live coverage on the latest income tax slabs 2024-25, income tax rates and other top income tax announcements:
“Compared to 2012-13 benchmarks, the 20% and 30% slabs must be updated for the old regime. Basis the Cost Inflation Index, the values for 2012-13 and 2024-25 are 200 and 363, respectively, implying an 81.5% rise in the index. Recent years of persistent inflation have pumped the index up substantially. It’s therefore imperative that old slab rates be suitably adjusted without further delay,” says BankBazaar.
Under these schemes, first-time employees entering the workforce in all formal sectors will receive a wage equivalent to one month's salary. This benefit will be provided through a direct benefit transfer (DBT) of up to Rs 15,000, which will be disbursed in three instalments. The eligibility criteria for this benefit is a monthly salary of up to Rs 1 lakh, and it is anticipated to benefit approximately 2.1 lakh young individuals.
For income between Rs 3 lakh and Rs 6 lakh, the tax rate is 5%
For income between Rs 6 lakh and Rs 9 lakh, the tax rate is 10%
For income between 9 lakh and Rs 12 lakh, the tax rate is 15%
For income between Rs 12 lakh and Rs 15 lakh, the tax rate is 20%
For income above Rs 15 lakh, the tax rate is 30%
When inflation-adjustment is not taken into account for income tax brackets, and considering the 2012-13 inflation figures as the starting point, it leads to the inference that taxpayers are shelling out more than what they should.
Under the old tax regime, earnings exceeding Rs 5 lakh are being subjected to excess taxes. In the new tax regime, this threshold is set at Rs 15 lakh, it says.
For instance, on an income of Rs 10 lakh, excess taxes paid in the old regime are Rs 43,226, or Rs 3602 per month. At Rs 20 lakh, excess taxes paid are Rs 1.84 lakh in the old regime and Rs 67,978 in the new regime.
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For incomes between Rs 1 crore and Rs 2 crore, the surcharge rate is 15% in both new and old income tax regime
For incomes between Rs 2 crore and Rs 5 crore, the surcharge rate is 25% in both new and old income tax regime
For incomes over Rs 5 crore, the surcharge rate under the new income tax regime is significantly lower at 25% compared to 37% under the old tax regime
As shown in the table, with the introduction of changes in the new tax regime effective FY 2023-24, Mr. A's tax burden has decreased further. However, it is important to note that Mr. A has only Rs 2 lakh in exemptions and deductions. If this amount were to increase, the old income tax regime would eventually result in a lower tax burden.
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Budget 2024 income tax expectations: Increase in the limits of various exemptions and deductions is one of the prime expectations of the individual taxpayers from any Union Budget. But with the current government’s focus on a simplified tax regime with minimal exemptions and deductions, do the taxpayers need to adjust their old-time favorite expectation ? Should the taxpayer expect tax reliefs in the New Tax Regime instead ? Either way, the individual taxpayers have high hopes from this Budget, especially in the absence of any tax proposals announced in the interim budget in Feb 2024.
Standard deduction is a vanilla / blanket tax deduction allowed to the salaried taxpayers, irrespective of the expenses or investments done by them.
To provide further tax relief to the salaried taxpayers while keeping the tax system simple, there is an expectation that the government may increase the standard deduction from Rs 50,000 to Rs 75,000 under the new tax regime.
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Budget 2024 Income Tax Expectations: Ahead of the Union Budget 2024 presentation by Finance Minister Nirmala Sitharaman, the government is currently evaluating a proposal to raise the tax-deductible limit on interest income from savings accounts to Rs 25,000.
This suggestion was put forward by banks during a recent meeting with key officials from the finance ministry. Banks have been advocating for deposit incentives due to increasing concerns about the widening credit-deposit ratio.
Under the old tax regime, interest income up to Rs 10,000 per year from savings accounts is tax-exempt under Section 80TTA of the Income Tax Act. For senior citizens aged 60 and above, this limit is set at Rs 50,000 and includes interest income from fixed deposits under Section 80 TTB. However, these benefits were removed under the new tax regime, when it was introduced in the 2020 budget.
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Revise tax slabs under new regime: Revising the tax slabs under the new tax regime for the middle-income taxpayers would be helpful, as the prior budgets have majorly focused on the lower income resident taxpayers and provided them with relief under section 87A and high networth income group by reducing the rate of surcharge. Hence increasing the existing slab of Rs 15 Lakhs income to Rs 20 Lakhs income for 30 percent tax rate would help reduce tax burden and help mitigate the rise in expenditure and increased living costs.
Increase standard deduction from Rs 50,000 to Rs 1 Lakh: In the backdrop of inflation, increasing the standard deduction from Rs 50,000 to Rs 1 Lakh under both the regimes would be a welcome move, offering taxpayers more disposable income and providing relief for pensioners who are dependent on monthly income other than taxable passive income.
Increase deduction on health insurance premium: Increasing the deduction on health insurance premium from the current limit of Rs 25,000 to Rs 1 Lakh is an ask from taxpayers considering that the health costs have substantially increased post covid. This will also provide relief to the taxpayers while incentivizing them to prioritize their health, which is crucial in the current times.
For income between Rs 2.5 lakh and Rs 5 lakh, the tax rate is 5%
Between Rs 5 lakh and Rs 10 lakh, the tax rate is 20%
For income above Rs 10 lakh, the tax rate is 30%.
It is important to note that the basic exemption limit for resident individuals who are senior citizens (aged 60 and above) is Rs 3 lakh, while for super senior citizens (aged 80 and above), it is Rs 5 lakh.
The government's focus is likely to promote new income tax regime in their journey towards simplification of tax structure. However, in terms of the old regime where the individuals continue to get deductions and exemptions. It may look at enhancing deduction limit under section 80C by at least Rs 50,000/- which was last hiked in 2014 when the current Government first came into power,” says Chander Talreja, Partner, Vialto Partners.
Income Tax Live: Parizad Sirwalla, Partner and Head, Global Mobility Services, Tax, KPMG in India lists the top 3 steps FM Nirmala Sitharaman should consider for income tax relief. These expectations were listed as part of the Times of India Online survey of personal tax experts:
- Revise tax slabs under new regime: Under the new regime the basic exemption limit was enhanced to Rs 3 lakhs in the 2023 Budget along with a tinkering of the tax slabs and rebate, to make the new tax regime more attractive. In line with the stated objective to gradually progress towards the new regime, the Government may consider a proposal to further enhance the basic exemption limit under the new tax regime to Rs 5 lakhs. The other slab rates may also be adjusted accordingly in line with our progressive tax rate system. This will aid in increasing the net disposable income in the hands of individual taxpayers.
- Increase standard deduction from Rs. 50 K to Rs. 1 Lakh: Standard deduction, which was only available under the old regime, was extended to the new tax regime as well in Budget 2023. However, the limit for this deduction, which was re-introduced in lieu of transport allowance and miscellaneous medical expenses, has remained constant at Rs 50,000 since Financial Year 2019-20. Hence, there is an expectation that the standard deduction limit will be enhanced to Rs 1 lakh, given the increasing cost of living and considering that this deduction also helps maintain parity between the salaried and those with business income.
- Allow deductions available u/s 80C (to more than Rs 1.5 lakhs) under the new regime: A longstanding expectation of the salaried taxpayers is an increase in the deduction limit of Rs 1.50 lakhs under section 80C to at least Rs 3 lakhs as the same has remained unchanged since 2014. Also, as currently this deduction is limited to the old tax regime, allowing this deduction in the new tax regime will help further the objective of making the new regime more attractive, while also channelizing individual savings into retirement savings/housing/ insurance etc.
The Government should further strengthen the internal technology support to address these challenges. Also, few tax return forms are required to be generated online through TRACES by individual taxpayers like Form 16B which takes a few days post submission of online details. The aim should be to reduce this turnover time as far as possible through efficient use of technology.
Further, online filing of submissions in case of scrutiny assessment or appeals requires uploading a lot of documents on the e-filing portal. While this online option saves taxpayers time, issues such as file size limitations, restriction on number of attachments, limited accepted document formats (PDF, JPG, etc.), requires the Government's attention to make faceless proceedings more successful,” says Chander Talreja, Partner, Vialto Partners.
Introduced on April 1, 2021, the scheme was designed to minimize human interaction in tax disputes and assessments. Under this system, the income tax department handles return processing, refund issuance, tax assessments, scrutiny, and appeal management. Cases are randomly assigned to assessing officers, irrespective of geographical jurisdiction.
Then residents get slab benefits but not the nonresidents.
On the manner of computing and taxation of capital gains for foreign investments even tax officers get confused. In relation to foreign assets, the provisions provide for first computing the gain in foreign currency in the year of sale along with indexation benefits as applicable and then convert the gain into Indian rupees by applying the applicable SBI TT rate. In some of the cases, tax payers have been slapped with a demand by the tax authorities, by using the exchange rate of the year in which assets was acquired (for cost of acquisition) and converting the sale proceeds with the exchange rate of the year of sale. But this is contrary to the mechanism as provided in rule 115 of Income Tax Rules, 1962.
Taxpayers even struggle to find the appropriate section and column in the return form where and how capital gains to be reported.
There is a pressing need and the Government may look at simplifying the capital tax regime to make it easy for everyone.
Capital markets are at life lifetime high and that may lead to tempting thoughts of collecting a little more in taxes. Government may increase the long term capital gain tax marginally and raise the exemption limit from Rs. 1 lac to Rs. 2 Lac to protect the small investors who have turned in masses towards capital market,” Kuldip Kumar, Partner at Mainstay Tax Advisors tells TOI.
What can you expect from the Modi 3.0 government’s Budget 2024? What are the top expectations from an income tax perspective and what do the experts recommend? We take a look:
The new income tax regime could be made more attractive by rationalizing the income tax rates and slabs, according to experts. They suggest that the 30% tax slab should be applicable for incomes above Rs 20 or Rs 25 lakh, instead of the current Rs 15 lakh threshold.
Tax experts believe that the current exemption limit of Rs 10,000 for interest on bank deposits is insufficient and should be increased. Moreover, they suggest that term deposits and fixed deposits should also be included under this limit.
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However, this change is not expected to take place during the upcoming Union Budget. This is because there is a large number of taxpayers who find the old tax regime still beneficial. Once the major population of taxpayers opt for the simplified tax regime, the government can look at phasing out the old tax regime, says Aarti Raote, Partner, Deloitte India.
All personal tax experts unanimously agree that to make the new income tax more attractive for taxpayers, especially for middle class salaried taxpayers, the government needs to tweak it to introduce more deductions and exemptions. One common deduction that experts believe should make way into the new income tax regime, and one that makes the old tax regime more lucrative for taxpayers, is housing loan deduction. Yet another recommendation is to increase the basic exemption limit and standard deduction under the new regime.
“Increase in the basic exemption limit from Rs 3 to 5 lakhs, raise the standard deduction to Rs 100,000,” Surabhi Marwah, Tax Partner, EY India tells TOI.
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Government’s transition plan to implement one regime of taxation should include stakeholder consultations, gradual phasing out of exemptions, reduced tax rates, broadening of tax base, and public awareness campaigns. Beginning with legislative amendments to consolidate the old and new regimes, followed by a clear timeline for implementation,” says Preeti Sharma, Partner, Tax & Regulatory Services, BDO India LLP responding to the Times of India Online pre-Budget 2024 expectations survey on personal tax.
Lower TCS Rates of 0.5% and 5% are also available for certain transactions.
This tax collected at the time of remittance of funds creates tax liquidity challenges for individuals while sending money abroad. Concept of TCS under the Income tax regime was introduced to track certain transactions and to ensure tax compliance later on.
However, in the case of LRS, 20% of funds at the time of remittance gets blocked creating liquidity challenges for individuals, especially for those who rely on regular remittances for personal.
For Instance, a salaried employee who has already paid taxes on his salary income if remitting the same for maintenance of family abroad ends up paying TCS @20%. Given TDS is already deducted on such income, he has no option than to claim TCS as refund in his tax return which unnecessary creates cash flow challenges for such an individual.
Similarly, on the purchase of an overseas tour package as well, TCS is collected at a rate of 20% for transactions exceeding Rs 7 Lakhs and at the rate of 5% for transactions below the limit. If the intent of these provisions is to track such transactions, the applicable tax rates are expected to be reduced as they are creating multiple practical challenges for individuals,” says Preeti Sharma, Partner, Tax & Regulatory Services, BDO India LLP.
In light of this, in Finance Act 2023 had rationalized tax rates for the super-rich where the peak surcharge of 37 percent was reduced to 25 percent for taxpayers filing under the new tax regime. This was carried out with a motive to bring down the maximum marginal rate from 42.744% to 39.00% and promote the new tax regime within the taxpayers. In addition, the surcharge on long-term capital gains was also rationalized to 15 percent for gains above Rs 2 crores.
Rather, the government could look at widening the tax base by inclusiveness approach of bringing the unregulated sector (vendors, professionals, small businesses) to help contribute to the tax kitty of the government,” Aarti Raote, Partner, Deloitte India tells TOI.
Employees receiving HRA and paying rent for their accommodation can claim a tax exemption on the allowance under the old income tax regime. The exemption amount depends on whether the employee resides in a metro city or not for tax purposes. However, if an employee receiving HRA does not live in a rented house, the entire allowance becomes fully taxable. One relief that is sought is to include more non-metro cities in the 50% House Rent Allowance (HRA) exemption list. HRA is a common component of employee compensation packages provided by many employers. Currently, rented houses in Delhi, Mumbai, Kolkata, and Chennai are eligible for a 50% exemption from HRA, while those in other locations fall under the 40% category. It is important to note that this classification was established over three decades ago.
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Income Tax Budget 2024 Expectations: Will FM Nirmala Sitharaman provide a big income tax relief to middle class, salaried taxpayers in Budget 2024? From a change in tax slabs and tax rates under the new income tax regime to raising the standard deduction limit and changes in Section 80C limits - the common man has several expectations from the Union Budget 2024. We take a look at the
top 10income tax expectations from Budget 2024 for middle class and salaried taxpayers.
Shortening the period to submit return acknowledgement (ITR V) in physical form to CPC to 30 days has also adversely impacted several NRIs as there are not many options to digitally e-verify the returns. Until those options are expanded, the time limit to submit the ITR V should be extended to 120 days.
Some of the other areas needing attention for NRIs also include, making corrections in the PAN online (which is currently manual, for example to change the citizenship), automated issuance of lower withholding certificates online where NRIs are receiving income in the form of rent or sale of property etc.
- Standardize capital gains tax across financial instruments
The government may look at simplifying the existing capital gains tax regime due to its complexity around different holding periods and tax rates across different category of assets. For example, the period of holding for debt instruments (other than some specified securities) is 36 months, for immovable property it is 24 months whereas for listed equity shares/equity-oriented mutual funds it is only 12 months.
Also, currently the base rate for taxation of long-term capital gains from listed equity shares/equity-oriented mutual funds is 10% without indexation (on gains exceeding Rs 1 lakh), while other long-term gains are taxed at 20% with or without indexation, depending on the nature of the asset.
Standardization will help reduce complexity and interpretation challenges.
- Increase limit of tax free capital gains from current Rs 1 lakh to Rs 3 lakh
Effective Financial Year 2018-19, Long Term Capital Gains (LTCG) exceeding Rs 1 Lakh earned from transfer of equity shares of a company or units of equity oriented mutual funds on which Securities Transaction Tax has been paid at the time of acquisition, are subject to tax @ 10% without indexation benefit. To boost investor confidence and incentivize infusion of further investment into the capital market, the government may consider enhancing the exemption limit from Rs 1 to Rs 3 Lakh.
The above recommendations were given by Parizad Sirwalla, Partner and Head, Global Mobility Services, Tax, KPMG in India as part of the Times of India Online pre-Budget 2024 survey.
The responses to such grievances are often delayed and even when received, they are very generic. It is expected from the Government to guide or train the tax officers so that the individuals do not face such issues and can provide an efficient manner for closure of grievances raised by the taxpayers,” she tells TOI.
Few may find the old regime beneficial as a lot of deductions and exemptions help them to save tax and also ensure that they don’t hit the income ceiling where the surcharge becomes applicable. Moreover, the government would also factor that there is a huge market for housing loans, various investments etc. which qualify for section 80C benefit and not allowing tax benefits for these may hamper their market demand. Hence, the flexibility to opt between the regimes would continue,” Chander Talreja, Partner, Vialto Partners tells TOI.
Expectations are high that more changes may be brought in the new income tax regime - possibly raising the basic exemption limit, hiking standard deduction, or/and rationalising the income tax slabs and tax rates further. Tax experts are divided on the ideal tax income tax slabs and income tax rates under the new tax regime. However, most agree that the 30% tax slab above an income of Rs 15 lakh is still steep and needs to be implemented at incomes of at least above Rs 20 lakh. Surabhi Marwah, Tax Partner, EY India is of the view that the basic exemption should be raised to Rs 5 lakh. She also advocates reducing the income tax rates in order to provide more disposable income in the hands of taxpayers.
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Surabhi Marwah, Tax Partner, EY India lists the top measures that should be taken to make online ITR grievance redressal smoother
- Before making adjustment, give proper opportunity (including virtual hearing) to the taxpayer where requested
- Replies filed by taxpayer should be dealt by officers having tax domain knowledge.
- Reasons for rejections should be incorporated in the final intimation
- Address anomalies in ITR utility and CPC return processing software at the earliest
- Limit the scope of adjustments by CPC to apparent mistakes
- Instruct Faceless Assessment Unit to address adjustments u/s. 143(1) in scrutiny assessments
Responding to the Times of India Online Survey, Preeti Sharma, Partner, Tax & Regulatory Services, BDO India LLP listed her top 3 income tax expectations from Union Budget 2024:
- Revise tax slabs under new regime: Under New Tax Regime, the income starting at Rs 3 lakhs is taxable @5%. However, the tax rate escalates sharply to 30% at the income level of Rs 15 lakhs. It is expected that the Government revise the thresholds at which highest tax rate applies from Rs 15 lakhs to Rs 25 Lakhs and bring down the applicable tax rate at this income level (i.e. Rs 15 lakhs) to 25%. Similarly, the slab for minimum income subject to tax also need an upward revision from Rs 3 lakhs to Rs 5 lakhs.
- Increase standard deduction from Rs 50,000 to Rs 1 lakh: Standard deduction of Rs 40,000 was introduced in 2018 in lieu of deduction for transport allowance and medical expense reimbursement. This was increased to Rs 50,000 in 2019 and given the escalating living expenses, a further increase of the deduction to Rs 75,000 is expected.
- Allow deductions available u/s 80C (to more than Rs 1.5 lakhs) under the new regime: Deductions under section 80C of the Income-tax Act serve dual purpose – creation of retirement corpus and tax saving. Under the New tax Regime, this deduction is not available. A modified version of Section 80C of the Act may be introduced under the New Tax Regime for providing deduction for contribution to PPF and NPS to promote savings towards retirement especially for private sector employees who do not have any pension to rely on at the time of their retirement.
