Budget 2024 makes new income tax regime more attractive: See how much taxes you can now save
The budget has proposed adjusting the tax slabs under the new tax regime to make it more appealing to taxpayers. The standard deduction has also been proposed to be increased to Rs 75,000 from Rs 50,000 under the new regime. These tweaks will help salaried employees in the new tax regime save up to Rs 17,500 in income tax, Finance Minister Nirmala Sitharaman said in her budget speech.
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The savings in tax due to the change in tax slabs will be more pronounced for the lower and middle income groups, but will be negligible for those in the higher income bracket (see graphic).
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The higher standard deduction of Rs 75,000 means anybody with an annual income of Rs 7.75 lakh will not have to pay any tax. Under the new tax regime, a taxpayer with an annual income of up to Rs 7 lakh per year is eligible for full tax rebate under Section 87A.
This is the second change in the slab structure of the new tax regime in as many years. Last year’s budget had reduced the number of slabs from seven to six. It also extended the standard deduction to the new regime, making it more attractive for taxpayers. “The ministry is favouring the new tax regime. By adjusting the tax slabs, the new tax regime becomes more attractive, which is likely to result in more taxpayers opting for it,” says Neeraj Agarwala, Partner, Nangia Andersen LLP. In her speech, Sitharaman pointed out that two third of taxpayers opted for the new tax regime in the previous financial year.
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However, this is also because the new tax regime has been made the default option for computing tax. “If a salaried taxpayer does not inform his employer, he is put under the new tax regime and taxed accordingly,”
says Sudhir Kaushik, CEO of tax filing portal Taxspanner.com. Once put in the new regime, the taxpayer can switch to the old tax regime only at the time of filing his tax return.
In a major relief to salaried taxpayers, the budget has proposed that tax collected at source (TCS) can be adjusted against TDS on sala ry. TCS is applicable on certain expenses, including remittances to foreign countries, expenses in foreign exchange and purchase of luxury cars priced above Rs 10 lakh. Anybody who sends money abroad has to cough up 20% TCS if the amount exceeds Rs 7 lakh.
“This posed a challenge for salaried employees, who ended up paying excess taxes for the year,” says Agarwala. Though the TCS is refunded when the taxpayer files his return, he has to wait up to 12-15 months for the refund. Someone who sent money abroad in May-June 2024, would have had to wait till July 2025 to file his tax return and get a refund 1-2 months later. The budget has proposed that the taxpayer can get the TCS adjusted against the TDS on his salary income. “This will ease the burden on taxpayers who send money to children studying abroad,” says Amit Maheshwari, Partner AKM Global.
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This story originally appeared on: India Times - Author:Faqs of Insurances
