Navigating the New Terrain: Essential Income Tax Changes for FY 2024-25

(Latest Updates on Income Tax Slab Rates)

According to the recent budget announcement, amended tax slab rates are applicable under the new tax regime, effective from April 1, 2024. The revised rates are as follows:

Total Income      |     Tax Rate
INR 0 to INR 3,00,000      |      0%
INR 3,00,001 to INR 6,00,000      |      5%
INR 6,00,001 to INR 9,00,000      |      10%
INR 9,00,001 to INR 12,00,000     |      15%
INR 12,00,001 to INR 15,00,001     |      20%
Above INR 15,00,000     |      30%

Benefits of Implementing the New Tax Regime

Here are the advantages of the new tax regime for taxpayers:

Effective April 1, 2024, taxpayers can simplify tax planning as the revisions aim to streamline the process.
With the introduction of the new tax regime, taxpayers are relieved from the burden of maintaining travel tickets and rent receipts.
Starting April 1, 2024, the basic exemption limit has been increased from Rs. 2.5 lakhs to Rs. 3 lakhs, making the new tax regime more attractive.

Note: The highest tax rate of 30% applies to income exceeding Rs. 15 lakhs.

Changes in Surcharge Rate
A reduced surcharge rate applies only to taxpayers who opt for the new tax regime and earn more than Rs. 5 crore.

The introduction of the new tax regime led to a reduction in the surcharge rate from 37% to 25%, applicable to individuals with an income exceeding Rs. 5 crores.

The following table illustrates the updated surcharge rates under the new tax regime:

Limit of Taxable Income     |     Surcharge Rate on Income Tax Value
Before Budget 2023     |     After Budget 2023
Less than INR 50 lakhs     |     0%     |     0%
INR 50 lakhs to INR 1 Crore     |     10%     |     10%
INR 1 Crore to INR 2 Crore     |     15%     |     15%
INR 2 Crore to INR 5 Crore     |     25%     |     25%
Above INR 5 Crore     |     37%     |     25%

Changes in Tax Rebate Limit

The rebate limit increases with the introduction of the new tax regime. Under the old tax regime, the applicable tax rebate limit for income up to Rs. 5 lakhs was Rs. 12,500. Under the new tax regime, this rebate is increased to Rs. 25,000 for taxable income up to Rs. 7 lakhs.

Both income tax regimes offer a rebate under section 87A. The taxable limit has been increased to Rs. 7 lakhs from Rs. 5 lakhs in the budget announcement under the new tax regime.

Standard Tax Deduction

A standard deduction of Rs. 50,000 applies to both the old and new tax regimes for salaried individuals.

Additional Tax Deductions Newly Introduced Under NTR
Deduction for the amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2).
Deduction from family pension income of Rs. 15,000 or 1/3rd of the pension (whichever is lower).
No Income Tax Applicable for Income up to INR 7 lakhs
Income tax is calculated as per slab rates, and the rebate is deducted from the final tax amount, resulting in zero tax liability.

With the introduction of the new tax regime, a standard deduction of Rs. 50,000 (for salaried individuals) was introduced. Therefore, taxpayers (receiving salary) with income less than or equal to Rs. 7.5 lakhs are not required to file taxes if they opt for the new tax regime.

Under the new tax regime in Budget 2023, a tax rebate was introduced for income less than or equal to Rs. 7 lakhs, implying that taxpayers who choose the new tax regime don’t have to pay tax if their income doesn’t exceed Rs. 7 lakhs.

Tax Exemption on Leave Encashment
Leave encashment is exempted under the new tax regime. The exemption limit for leave encashment was increased from Rs. lakhs to Rs. 25 lakhs for non-government employees as per the Budget 2023 announcement. Leave encashment amounting to Rs. 25 lakhs is tax-free at the time of retirement under Section 10(10AA).

Switching Back to the OTR
The new income tax regime will be the default tax regime from FY 2023-24.

It is important to submit Form 10-IEA while filing tax returns if you plan to switch back to the old tax regime.

The frequency of switching between old and new tax regimes depends on the type of income. If the income is professional or business-related, you can switch between the old and new tax regimes only once in your life. However, if the income is other than professional/business income, you can switch between the old and new tax regimes annually.

Life Insurance Policies
Under the new tax regime, income received from life insurance policies will be taxed if the yearly premium exceeds Rs. 5 lakhs.

Starting April 1, 2023, as per the Budget 2023 announcement, income from life insurance policies with an annual premium of over Rs. 5 lakhs will be taxable to the policyholder. The revised income tax rules will not apply to Unit Linked Insurance Plans (ULIPs).

The amount received from the life insurance policy is tax-deductible until the premiums paid on the policy do not exceed 10% of the sum assured.

Changes in the Tax Presumptive Scheme
The tax council provides the presumptive scheme of taxation, which simplifies calculating taxable income for specific eligible businesses or professions. Taxpayers under this scheme can show income at a specified rate based on presumptions instead of maintaining detailed books of accounts.

The same presumptive tax scheme operates under both the old and new tax regimes.

Category Type      |      Turnover Receipts Before Budget 2023      |      Turnover Receipts After Budget 2023
Small Business Owners (as per Section 44AD)      |      INR 2 Crore      |      INR 3 Crore
Specified Professionals (such as lawyers, doctors, freelancers, engineers, interior decorators, etc. (as per Section 44ADA)      |      INR 50 lakhs      |      INR 75 lakhs"

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