Income Tax Slab 2024-25: No Tax Till Rs 3 lakh Income Under New Tax Regime

In the latest Union Budget for the fiscal year 2024-25, the government has announced an increase in the standard deduction limit to Rs 75,000. This adjustment is set to benefit the salaried class by enabling them to save up to Rs 17,500 in taxes under the new income tax regime. Previously, the standard deduction was capped at Rs 50,000, and while there were hopes for it to rise to Rs 1 lakh, the increase to Rs 75,000 marks a significant step in providing financial relief to taxpayers.

Among the many announcements, Finance Minister Nirmala Sitharaman proposed eliminating income tax on earnings up to Rs 3 lakh per annum. The tax slab for the 5% rate has been adjusted from Rs 5 lakh to Rs 7 lakh. The capital gains tax regime was also overhauled, resulting in increased tax rates. As anticipated, no changes were made to the old income tax regime, as the government aims to encourage adoption of the new tax structure.

One expected change in Budget 2024 was the introduction of a 30% income tax rate for earnings above Rs 20 lakh, instead of the current Rs 15 lakh threshold, to provide more disposable income to the middle class. The basic exemption limit under the new tax regime was increased to Rs 3 lakh last year, with a rebate limit set at Rs 7 lakh.

New Income Tax Regime Slabs for FY 2024-25

Under the revised income tax regime for the fiscal year 2024-25, the following tax slabs will apply:

Up to Rs 3 lakh: Nil
Rs 3 lakh to Rs 7 lakh: 5%
Rs 7 lakh to Rs 10 lakh: 10%
Rs 10 lakh to Rs 12 lakh: 15%
Rs 12 lakh to Rs 15 lakh: 20%
Above Rs 15 lakh: 30%

Key Changes Announced:

Increased Standard Deduction:

New Limit: The standard deduction for taxpayers opting for the new income tax regime has been increased to Rs 75,000.
Tax Savings: This adjustment enables individuals to save up to Rs 17,500 in taxes, enhancing financial relief for the salaried class.

Proposed Increase in Long-Term Capital Gains Tax:

New Rate: Finance Minister Nirmala Sitharaman has proposed raising the long-term capital gains tax from 10% to 12.5%.
Impact: This change is aimed at adjusting the tax treatment of long-term investments, reflecting broader economic and financial policy adjustments.

Review of Income Tax Act:

Objective: A comprehensive review of the Income Tax Act has been announced, focusing on simplifying taxation norms.
Expected Outcome: The review aims to streamline tax processes and potentially provide additional relief to taxpayers, thereby increasing their disposable income.

Corporate Tax Rate Reduction:

New Rate: The corporate tax rate is set to be reduced from 40% to 35%.
Purpose: This reduction is intended to boost the business environment, encouraging investment and economic growth.