Budget 2024: Making the New Income Tax Regime More Attractive

Budget 2024: Making the New Income Tax Regime More Attractive

The Union Budget 2024 has introduced significant changes to the income tax regime, aiming to make the new tax regime more attractive for taxpayers. Finance Minister Nirmala Sitharaman announced several adjustments, including an increase in the standard deduction and modifications to the tax slabs, which promise substantial savings for salaried employees.

Key Highlights of Budget 2024

1. Increased Standard Deduction: The standard deduction has been increased from ₹50,000 to ₹75,000 under the new tax regime. This adjustment alone can help salaried employees save up to ₹17,500 in income tax.

2. Tax Slab Adjustments: The new tax regime's slabs have been restructured to benefit lower and middle-income groups significantly. Taxpayers with an annual income of up to ₹7.75 lakh will not have to pay any tax, thanks to the higher standard deduction and the existing full tax rebate under Section 87A for incomes up to ₹7 lakh.

   

3. Two-Thirds of Taxpayers Opt for New Regime: Last year, two-thirds of taxpayers opted for the new tax regime, a trend likely to continue with the recent enhancements. The new tax regime has become the default option for tax computation unless taxpayers inform their employers otherwise.

4. Adjustments in Tax Collected at Source (TCS): In a relief to salaried taxpayers, the budget proposes that TCS can be adjusted against TDS on salary. This is especially beneficial for those sending money abroad for education or other expenses, as it reduces the burden of waiting for refunds.

Impact on Different Income Groups

The savings from the new tax regime are more pronounced for lower and middle-income groups. For higher income brackets, the benefits are relatively minimal, but the overall structure aims to simplify and streamline tax compliance.

Expert Opinions

Neeraj Agarwala, Partner at Nangia Andersen LLP, stated, "The ministry is favouring the new tax regime. By adjusting the tax slabs, the new tax regime becomes more attractive, which is likely to result in more taxpayers opting for it."

Sudhir Kaushik, CEO of Taxspanner.com, noted, "If a salaried taxpayer does not inform his employer, he is put under the new tax regime and taxed accordingly. This automatic enrollment underscores the government's push towards the new regime."

Additional Budget Highlights

• New Employment-Linked Incentives: The budget allocates ₹1.48 lakh crore for education, employment, and skill development.

• Foreign Project Funding: Significant allocations have been made for India-funded projects in neighboring countries, including Nepal and Sri Lanka.

• Market Reactions: The budget's proposal to hike the securities transaction tax on futures & options caused a temporary dip in the stock market, though it recovered most of its intra-day losses.

The Budget 2024 aims to provide relief to salaried taxpayers while promoting a simplified tax structure. With these changes, the government hopes to see increased adoption of the new tax regime, ultimately leading to a more efficient and taxpayer-friendly system.

References:

• Budget 2024 makes new income tax regime more attractive: See how much taxes you can now save
• Budget 2024 Live Updates: Nirmala Sitharaman Union Budget Highlights
• Budget 2024: Seventh speech, 71 rounds of applause
• Budget 2024 key highlights: Live updates on Nirmala Sitharaman's infrastructure, defence, income tax announcements

Check out the above links for more details.