New Tax regime slabs changed, standard deduction up from 50,000 to 75,000

Mangalore Today News Network

New Delhi, July 23, 2024: Standard deduction in the new tax regime will be increased from ₹ 50,000 to ₹ 75,000, Finance Minister Nirmala Sitharaman said Tuesday as she announced the 2024 Union Budget.

Ms Sitharaman also announced revisions to tax slabs in the new regime. As a result, the Finance Minister told Parliament, salaried employees can save as much as ₹ 17,500 in the new regime.

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It will also, she said, provide salaried individuals with higher tax savings and more disposable income.

Existing new tax regime slabs (effective for FY 2023-24) were as follows:

1. Income up to ₹ 3 lakh - Nil
2. Rs 3 lakh to ₹ 6 lakh - 5 per cent
3. Rs 6 lakh to ₹ 9 lakh - 10 per cent
4. Rs 9 lakh to ₹ 12 lakh - 15 per cent
5. Rs 12 lakh to ₹ 15 lakh - 20 per cent
6. Above ₹ 15 lakh - 30 per cent

The increase in standard deduction was one of the most anticipated ahead of the budget speech.

Industry experts speculated this could double to ₹ 1,00,000, but Ms Sitharaman fell slightly short.

In addition, deduction on family pension for pensioners will be increased from ₹ 15,000 to ₹ 25,000.

These tweaks will bring relief for around four crore salaried individuals and pensioners, she said.

Changes to income tax slabs, old and new, were in focus ahead of Ms Sitharaman’s speech as the country’s mammoth middle class clamoured for relief from tax burdens. There was little joy for the middle class in the interim budget - which pegged gross tax revenue at ₹ 38.31 lakh crore for 2024-25, an 11.46 per cent growth over the last fiscal - so all eyes were on the Finance Minister today.

Ms Sitharaman, however, had to walk a tight rope as she looks to stimulate growth and provide relief.

Another big expectation was a hike in exemption limit. Under the new regime, those earning under ₹ 3 lakh a year are exempt from paying tax. There was speculation this could be raised to ₹ 5 lakh.

There was, however, no such announcement.

There was also no changes announced for tax slabs under the old regime. This is amid speculation the government plans to do away with this option for next year.

Net direct tax collection posted a robust 19.5 per cent growth to ₹ 5.74 lakh crore till July 11 of this financial year compared to the same period in the previous, according to the Income Tax Department.

Capital Gains Tax

Short-term gains on certain financial assets will be taxed at 20 per cent, while long-term gains (on all financial and non-financial assets) will attract tax of 12.5 per cent, Ms Sitharaman said.

Also, listed financial assets held for over a year have been re-classified as long-term.

Angel Tax Abolished

In a bid to bolster the start-up ecosystem, the government also announced the abolishment of angel tax for all classes of investors.

Angel tax is levied on capital raised via issue of shares by unlisted companies from an Indian investor if the share price of issued shares is seen in excess of the fair market value of the company.

The excess realisation is considered as income and is taxed accordingly.

Abolishing this tax also drew rare praise from the opposition; Congress leader and ex-Finance Minister P Chidambaram said he was "pleased". "Congress has pleaded for the abolition for many years..."

Other Taxes

Ms Sitharaman also proposed a simpler tax regime for foreign shipping companies operating domestic cruises in the country, with an aim to give a boost to cruise tourism in the country.

Review Of Tax Laws

The Finance Minister also announced a comprehensive review of the Income Tax Act of 1961, which will make it easier to read and understand, and reduce uncertainty and potential for litigation.

This will be completed in six months.

As part of this overhaul, Ms Sitharaman said tax authorities could only re-open assessments within three years from end of assessment and if the escaped income is ₹ 50 lakh and over.

Even then, the time limit for search cases is to be reduced from 10 years to six before year of search.

"A beginning is being made in the Finance Bill by simplifying the tax regime for charities, TDS rate structure, provisions for reassessment and search provisions and capital gains taxation," she said.

As per the proposal, two tax exemption regimes for charities will be merged into one.

The five per cent TDS, or Tax Deducted at Source, rate is being merged into the two per cent rate and the 20 per cent rate on repurchase of units by mutual funds, or UTI, is being withdrawn, she said.

The TDS rate on e-commerce operators will be reduced from one to 0.1 per cent, she added.

Also, Ms Sitharaman said she proposed to decriminalise delay for payment of TDS, or Tax deducted at Source, up to the due date of filing the concerned statement.