Interim Budget 2024: To popularize the new income tax system in the budget of 2023-24, the government made several announcements in which it gave relief of tax exemption on income up to Rs 7 lakh.
Union Budget 2024: While presenting the Union Budget for the financial year 2020-21, Finance Minister Nirmala Sitharaman brought a new income tax regime for taxpayers. When the new tax system was implemented for the first time, taxpayers did not get the benefit of deduction on investment or savings. Under the new tax system, taxpayers were not given the benefit of tax exemption under sections 80C and 80D. Due to which taxpayers were hesitant in adopting the new tax system. Less than 10 percent of the total taxpayers chose the option of the new tax system. In the new income tax regime, taxpayers were having to pay more tax and were also not getting the benefit of tax exemption on investments and savings.
New tax regime made attractive
But when the Finance Minister presented the fifth budget of the second term of the Modi government for the financial year 2023-24, the Finance Minister made big announcements to make the new income tax regime attractive. While making changes in the tax slabs of the new income tax regime in his budget, the Finance Minister announced that those taxpayers whose annual income is up to Rs 7 lakh will not have to pay any tax. According to an estimate, 7 crore taxpayers whose annual income is less than Rs 7 lakh have got the benefit of the Finance Minister’s announcement.
No tax on income up to Rs 7 lakh
In the new tax regime, those whose income is up to Rs 7 lakh will not have to pay even a single rupee tax. But if those whose annual income is more than Rs 7 lakh, they will not have to pay any tax on income up to Rs 3 lakh under the new income tax system. But if the income is more than Rs 7 lakh, 5 percent on the taxable income slab of Rs 3 to 6 lakh, 10 percent on the taxable income of Rs 6 to 9 lakh, 15 percent on the slab of Rs 9 to 12 lakh, 12 to 15 lakh Income tax will have to be paid at 20 per cent on Rs 10 lakh slab and 30 per cent on income above Rs 15 lakh. The Finance Minister also announced the benefit of standard deduction to salaried and pensioners in the new tax regime. Salaried and pensioners will get the benefit of standard deduction of Rs 50,000.
Default tax regime is the new income tax system
The new income tax regime is now the default tax regime. That is, at the time of filing income tax returns, taxpayers will have to choose the option of the old tax regime. Under the new tax regime, under 87A, a rebate of Rs 12,500 was being given to the taxpayers on income up to Rs 5 lakh, now a rebate of Rs 25,000 is being given on income up to Rs 7 lakh. In the new regime, the basic income tax exemption limit has been increased from Rs 2.50 lakh to Rs 3 lakh.
Also getting the benefit of standard deduction
Under the new income tax regime, the tax slab was also changed so that it could be made better like the old tax regime. In the old tax regime, taxpayers get the benefit of standard deduction of Rs 50,000, investment up to Rs 1.50 lakh under 80C, Rs 50,000 under 80CC1B in NPS and tax exemption ranging from Rs 25,000 to Rs 1 lakh under 80D. Apart from this, taxpayers also get tax exemption on interest on home loan up to Rs 2 lakh. Major changes were made to make the new income tax regime as attractive as the old tax regime.
Benefit of deduction in old tax regime
However, the new income tax regime will not affect those taxpayers who have taken home loan to buy a house or insurance or NPS. For those who have invested in PPF, the old tax regime is better. In the old income tax system, taxpayers can avail tax exemption in many ways through deduction in income. Tax benefit to taxpayers on home loan principal amount along with insurance, ELSS, Employee Provident Fund, PPF and children’s tuition fees under Section 80C of Income Tax. ) can take advantage of. There is also a provision for tax exemption on home loan interest up to Rs 2 lakh. Apart from this, you can avail deduction under 80D on payment of mediclaim premium.
Mediclaim benefit possible in new tax regime
However, it is also expected from the interim budget to be presented before the Lok Sabha elections that the Finance Minister can make some big announcements to improve the new income tax regime. It is believed that under the new income tax regime, the benefit of deduction can be given on payment of mediclaim premium. So that the tax burden on taxpayers can be reduced. Also, the limit of standard deduction is expected to be increased from Rs 50,000 to Rs 75,000 under the tax system.
