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Tax Slabs Under New Tax Regime: In the Union Budget for FY25, Finance Minister Nirmala Sitharaman announced big changes to the income tax rates under the new tax system.
The Finance Minister raised the standard deduction from ₹50,000 to ₹75,000 in her Budget statement in Parliament on July 23. This was done to help people make more money under the new tax system. The present tax slabs were also changed to fit the new system. People will be able to pay less income tax total if they make this change.
“I have two announcements for people who decide to use the new tax system.” The normal deduction for salaried workers should be raised from ₹50,000 to ₹75,000, according to the first suggestion. In the same way, it is advised that the family pension deduction for pensioners be raised from ₹ 15,000 to ₹ 25,000. The Finance Minister says that this will help about four crore working and elderly people.
Still, the finance minister didn’t change the tax rates or slabs that were in place before.
If the changes are made, monthly income up to ₹3 lakh would still not be taxed. However, the 5% tax band has been raised from ₹3 lakh to ₹7 lakh, up from ₹3 lakh to ₹6 lakh.
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Whereas in the past range of ₹6 lakh to ₹9 lakh the taxable income of ₹7 lakh to ₹10 lakh would now be subject to the 10% tax rate.
The planned changes will allow paid individuals to save as much as ₹17,500 yearly, claims the Finance Minister.
The tax bands for ₹12 lakh to ₹15 lakh and ₹15 lakh and above remain the same.
| Total annual taxable income | Rate of tax applicable |
|---|---|
| Upto ₹3 lakh | NIL |
| From ₹3 lakh to ₹6 lakh | 5% |
| From ₹6 lakh to ₹9 lakh | 10% |
| From ₹9 lakh to ₹12 lakh | 15% |
| From ₹12 lakh to ₹15 lakh | 20% |
| ₹15 lakh and above | 30% |
Budget 2024’s suggested tax rate structure under the new tax system follows:
Total annual taxable incomeRate of tax applicableUpto ₹3 lakhNILFrom ₹3 lakh to ₹7 lakh5%From ₹7 lakh to ₹10 lakh10%From ₹10 lakh to ₹12 lakh15%From ₹12 lakh to ₹15 lakh20%₹15 lakh and above30%
Under the new tax structure, the government hiked the income rebate from ₹5 lakh to ₹7 lakh in Budget 2023. The normal deduction of ₹50,000 has remained for salaried taxpayers and pensioners under the new tax system. Income up to ₹7.5 lakh was therefore not subject to taxes.
Thanks to Budget 2024’s boost in the standard deduction to ₹75,000, income tax would not apply on yearly incomes up to ₹7.75 lakh going forward.
Instead of the previous total outlay of ₹52,500, the revised new tax regime will demand individual taxpayers with annual incomes up to ₹10 lakh pay ₹42,500 in taxes.
Should you be an individual taxpayer with annual income of up to ₹12 lakh under the new tax system, you will now owe ₹68,750 in total income tax rather than ₹82,500.
Those making ₹20,00,000 annually will now have to pay ₹2,67,500 in income tax instead of ₹2,85,000 as they used to.
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The modifications done to the tax system aim to empower the middle class more. The only system that lets taxpayers take advantage of bigger standard deductions and tax slabs is the new tax one, thus they should be informed. The government has not changed the former tax system, hence taxpayers must choose the new tax regime when submitting income tax returns (ITR) for FY 2024–2025. The new tax system is the one used default for FY 2023–24 (AY 2024–25).
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