India’s new income tax rules come into effect from tomorrow, check slabs
Income Tax Rule: The default adoption of the new tax regime is a notable modification. Its objective is to streamline the tax filing procedure and promote greater participation in the new regime.
The start of a new fiscal year on April 1st is always noteworthy in terms of personal finances since it signifies the implementation of the majority of the budget’s income tax plans. Furthermore, as of this day, additional modifications are also applicable that can have an effect on people’s personal finances. Finance Minister Nirmala Sitharaman made these announcements during this year’s budget speech. Here are some of the most significant adjustments that you should be aware of, including increased basic exemption limitations.
Important changes in income taxes that take effect on April 1st:
New Tax Regime Default Adoption
The default adoption of the new tax regime is a notable modification. Its objective is to streamline the tax filing procedure and promote greater participation in the new regime, featuring reduced tax rates albeit with fewer deductions and exemptions. However, taxpayers will still have the liberty to stick to the old tax regime if it is more beneficial to them.
Restoration of Standard Deduction
The standard deduction of ₹ 50,000, previously applicable exclusively to the old tax regime, has now been incorporated into the new tax regime. This serves to further decrease the taxable income under the new regime.
The new tax slabs will be as follows:
- Income part from ₹ 3 lakh and ₹ 6 lakh will be taxed at 5%
- Rs 6 lakh to ₹ 9 lakh will be taxed at 10%
- Rs 9 lakh to ₹ 12 lakh will be taxed at 15%
- Rs 12 lakh to ₹ 15 lakh will attract a 20% tax
- Rs 15 lakh and above will be taxed at 30%
Elevated Basic Exemption Limit and Rebate
As announced in the last Budget, effective from April 1, 2023, the basic exemption limit was hiked to ₹ 3 lakh from ₹ 2.5 lakh under the new tax regime, while the rebate under Section 87A of the Income Tax Act, 1961, was increased to ₹ 7 lakh from ₹ 5 lakh. Hence, people with a taxable income up to ₹ 7 lakh or a gross income of ₹ 7.5 lakh under the new regime will get a full tax rebate, absolving them from paying any income tax.
Illustration
Your total income: Rs 7,50,000
Standard deduction: Rs 50,000
Total taxable income = Rs 7,50,00-Rs50,000 = Rs 7,00,00
Tax on Income Rs 3,00,000 and Rs 6,00,000: Nil
Tax on Income between Rs 3,00,000 and Rs 6,00,000: 5% of Rs 3,00,000 = Rs 15,000
Tax on Income between Rs 6,00,000 and Rs 7,00,000 = 10% of Rs 1,00,000 = Rs 10,000
Total Tax liability = Rs 15,000 + Rs 10,000 = Rs 25,000
Rebate under section 87A = Rs 25,000
Tax payable = 0
The finance minister took to ‘X’ to debunk rumors and clarify the taxation:
It has come to notice that misleading information related to new tax regime is being spread on some social media platforms. It is therefore clarified that:
— Ministry of Finance (@FinMinIndia) March 31, 2024
👉 There is no new change which is coming in from 01.04.2024.
👉 The new tax regime under section 115BAC(1A) was… pic.twitter.com/DtKGkK0D5H
Reduced Surcharge
The highest rate of surcharge of 37% on income above ₹ 5 crore was reduced to 25%. This results in a reduced effective tax rate for individuals with high incomes who choose the new regime.
Life Insurance Taxation
As per the announcement by the Finance Minister, maturity proceeds from life insurance policies which are issued on or after April 1, 2023, and where the total premium exceeds ₹ 5 lakh, will be subject to taxation.
Exemption Of Enhanced Leave Encashment
The leave encashment tax exemption limit for non-government employees was ₹ 3 lakh since 2022 and is now increased to ₹ 25 lakh.
