FM is going to present the budget 2024 in Parliament on July 23. Taxpayers are anticipating some much-needed tax relief measures from the government.
Reetu | Jul 10, 2024 |
Budget 2024: Expectation of Changes in Tax Slab; No Tax on Annual Income if Basic Exemption hiked to Rs.5 lakh
Finance Minister Nirmala Sitharaman is going to present her first budget in Modi 3.0 in Parliament on July 23. Overall, this will be her seventh consecutive budget presentation, with an interim one delivered in February of this year.
With just a fortnight to go before the Union Budget 2024, taxpayers, particularly those in the middle class, are anticipating some much-needed tax relief measures from the government of Modi.
They are particularly hoping that the government will increase the basic exemption level from Rs.3 lakh to Rs.5 lakh, enhance the standard deduction limits, and implement new deduction benefits under the new tax regime.
Currently, the new tax regime only provides a standard deduction advantage of Rs.50,000, with no further deductions or exemptions available under the old tax regime.
Experts predict that the tax system will be changed significantly in the upcoming budget. They believe that the government may extend the basic tax exemption level under the new tax regime from Rs.3 lakh to Rs.5 lakh per year.
If an increase is implemented, individuals with yearly incomes of up to Rs 8.5 lakh may be able to avoid paying income tax. This computation takes into account the standard deduction and rebate under Section 87A, assuming they remain unchanged.
Such a move would bring enormous relief to middle-income individuals by significantly raising the tax-free income level and increasing disposable income for millions of taxpayers.
Click Here to Know What Tax Relief for Salaried Individuals should be considered
Currently, income up to Rs 7.5 lakh with an exemption limit of Rs.3 lakh is tax-free after applying the Standard Deduction and Rebate under section 87A.
Current tax slabs under the new tax regime:
| Tax slabs | Tax rate |
| Up to Rs.3 lakh | 0% |
| Rs.3 lakh to Rs.6 lakh | 5% (Tax rebate u/s 87A) |
| Rs. 6 lakh to Rs. 9 lakh | 10% (Tax rebate u/s 87A up to Rs. 7 lakh) |
| Rs. 9 lakh to Rs. 12 lakh | 15% |
| Rs. 12 lakh to Rs. 15 lakh | 20% |
| Above Rs. 15 lakh | 30% |
Revised Tax Slabs (Expected):
| Tax slabs (assumed under the new tax regime) | Tax rate |
| Up to Rs. 5 lakh | 0% |
| Rs. 5 lakh to Rs. 6 lakh | 5% (Tax rebate u/s 87A) |
| Rs. 6 lakh to Rs. 9 lakh | 10% (Tax rebate u/s 87A on income up to Rs. 8 lakh) |
| Rs. 9 lakh to Rs. 12 lakh | 15% |
| Rs. 12 lakh to Rs. 15 lakh | 20% |
| Rs. 15 lakh and above | 30% |
Note: These are illustration slabs that show how the modifications would look with a higher exemption limit. The actual tax slabs and rates would be determined by the government’s tax policy decisions.
Under the current scenario, with an exemption maximum of Rs.3 lakh, the tax-free income limit consists of numerous components. First, there is a standard deduction of Rs.50,000. There is also a tax rebate available under section 87A, which provides up to Rs.25,000 in relief if the taxable income is Rs.7 lakh or less. As a result, after deducting the normal deduction of Rs.50,000, the taxable income for which no tax is payable is Rs.7.5 lakh.
In the updated scenario, with a raised exemption threshold to Rs 5 lakh, the tax-free income limit alters dramatically. The standard deduction remains at Rs. 50,000. The tax rebate under section 87A would also apply, offering Rs 25,000 in relief if the taxable income is Rs 8 lakh or less. As a result, the taxable income for which no tax is payable would be Rs 8.5 lakh, including the Rs 50,000 standard deduction.
Here’s the illustration shows the tax-free income limits under both scenarios:
| Exemption limit (Rs.) | Standard Deduction (Rs.) | Tax rebate (Rs.) | Tax-free income limit (Rs.) |
| Rs. 3 lakh | Rs. 50,000 | Rs. 25,000 (u/s 87A) | Rs. 7,50,000 |
| Rs. 5 lakh | Rs. 50,000 | Rs. 25,000 (u/s 87A) | Rs. 8,50,000 |
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