On February 1, 2024, the Indian government issued an interim budget describing its financial objectives for the remainder of the current fiscal year and laying the framework for the full budget, which is scheduled in July 2024 following the general elections. Notably, the interim budget makes no modifications to the income tax slabs or rates for the fiscal year 2024-25 (Assessment Year 2025-26). This indicates that the existing tax slabs and rates from the previous budget (Budget 2023) would continue to apply for the coming fiscal year. For more Income Tax Return Filing Courses, you can visit us and get more details.
Understanding the Existing Income Tax Slabs and Rates:
Navigating the tax landscape in India can be difficult due to two distinct regimes and variable slabs and rates. This tutorial seeks to simplify the system and help you better understand your tax obligations.
1. Two Tax Regimes: A Choice for Individuals
The Indian income tax system provides people with two alternatives for submitting returns:
Old Tax Regime: The old tax structure allowed taxpayers to claim numerous deductions and exclusions under several parts of the Income Tax Act of 1961. These deductions can dramatically reduce your taxable income, resulting in a smaller tax bill. However, the previous system had a higher base tax rate structure than the current regime.
New Tax Regime: Introduced in the 2020 Union Budget, this regime provides a simpler tax structure with reduced rates. However, it has restricted deductions and exemptions, thus taxpayers cannot claim the many benefits available under the previous regime.
Old Tax Regime: Breaking Down the Details
Basic exemption limit:
Individuals under the age of 60, Hindu Undivided Families (HUFs), and Non-Resident Indians (NRIs) are eligible for a basic exemption limit of Rs. 2.5 lakh in the fiscal year 2023-24 (assessment year 2024-25). This means that income up to Rs. 2.5 lakh is not taxed.
Tax slabs and rates:
The previous tax regime used a progressive tax structure, in which the tax rate rose as your income increased. Here’s a breakdown of the income brackets and their respective tax rates:
Income Range (Rs.) | Tax Rate (%) |
| Up to 2.5 lakh | Nil |
| 2.5 lakh – 5 lakh | 5 |
| 5 lakh – 10 lakh | 20 |
| Above 10 lakh | 30 |
Additional Surcharge:
In addition to the tax computed based on the income slabs, people may be required to pay a surcharge based on their total income:
There is a 10% surcharge on income above Rs 50 lakh.
There is a 15% levy on income over Rs. 1 crore.
A 37% surcharge is levied on revenue above Rs 5 crore.
2. New Tax Regime (Introduced in Budget 2020):
Benefits:
- Lower tax rates relative to the previous system.
- Simplified tax filing with restricted deductions and exemptions.
Changes Implemented in Budget 2023:
- Increased the basic exemption limit: from Rs. 2.5 lakh to Rs. 3 lakh.
- Reduced Highest Tax Rate: The upper ceiling of 30% tax now applies to income exceeding Rs. 15 lakh, as opposed to Rs. 10 lakh previously.
- Revised Rebate Under Section 87A: Increased to Rs. 25,000 for taxable income of up to Rs. 7 lakh
- Exemption for family pension: Introduced an exemption of Rs. 15,000 for family pensions.
- Reduced surcharge for high earners: The highest surcharge rate of 37% applied for revenue exceeding Rs. 5 crore was reduced to 25%.
Implications of No Change in Interim Budget 2024:
Individuals have both possibilities and uncertainties because the 2024 interim budget makes no changes to the current income tax structure. Let’s look into the probable consequences:
1. Continuity for Informed Decision-Making:
- Stability in Tax Regimes: Because the present tax slabs and rates remain stable, people may use the known framework to select the tax regime that reduces their tax burden.
- Timely Analysis and Selection: The lack of abrupt changes allows taxpayers to assess their financial circumstances, including income levels, deductions, and exemptions, in order to make an educated decision about whether regime (old or new) best meets their needs.
- Understanding Deductions Versus Lower Rates: The ability to weigh the benefits of claiming various deductions under the previous system against the prospective benefits of reduced tax rates under the new regime provides for a more realistic evaluation of each alternative.
2. Facilitating Tax Planning Strategies:
- Predictability for Financial Planning: The continuance of the present tax system enables people to reliably plan their finances and investments for the following fiscal year, taking into account the known tax effects.
- Strategic Investment and Savings: Understanding the tax treatment of various investment alternatives allows people to make more educated decisions about their portfolio composition, potentially optimizing profits after accounting for taxes.
- Tax Efficiency: By grasping the subtleties of both tax systems, people may take advantage of various investment methods and available deductions to reduce their total tax burden.
3. Uncertainty and the Need for Vigilance:
- Potential Future Changes: While the interim budget preserved the status quo, a complete budget is set for July 2024, which may include changes to the tax structure. Because of this possibility for change, it is critical to remain up to date on any forthcoming changes that may affect tax preparation tactics.
- Staying Updated: Individuals who check for updates from government sources on a regular basis and engage with tax specialists closer to the complete budget release will be better equipped to alter their financial plans and tax strategies.
Additional Considerations:
Tax Deductions and Exemptions: Individuals who choose the old tax system can claim a variety of deductions and exemptions, including medical expenditures, house loan interest, investments in specialized schemes, and so on. Analyzing these deductions can be critical to reducing tax obligation.
Seeking professional guidance: Individuals with complex financial situations or who are confused about which tax regime is best for them may benefit from consulting with a tax professional. Professional assistance can help assure compliance with tax requirements and maximize tax savings.
Conclusion:
The interim budget statement in February 2024 indicated that the current income tax slabs and rates, including the adjustments introduced in Budget 2023, will be in place for fiscal year 2024-25. Understanding these current arrangements and how they may impact your personal tax liability is critical. While the interim budget contained no changes, remaining updated about anticipated amendments to the next full budget is critical for successful tax preparation. Consulting with a tax professional can help you navigate the intricacies of the income tax system and make educated decisions.