The 2024 Union Budget introduced notable changes to the income tax slab structure, aiming to streamline taxation and provide relief to a broader segment of taxpayers. As governments strive to balance growth with revenue generation, tax reforms like these play a pivotal role. For individuals, understanding how the new tax slab works is crucial not only for annual filings but also for planning investments and savings throughout the year. The revised income tax slabs under the new regime reflect a shift towards a simplified taxation system, while still offering certain exemptions to boost consumer spending and financial planning.
Overview of the 2024 Tax Slab System
The New Budget 2024 emphasizes clarity, reduced tax burden on the middle class, and greater adoption of the new tax regime. The structure introduces revised income brackets with lower rates for some ranges, while maintaining zero tax liability for the lowest income group. The key goal is to provide taxpayers with more disposable income and encourage a consumption-driven economy.
New Tax Regime vs. Old Tax Regime
The Indian income tax system continues to provide two options to individuals: the old regime with various deductions and exemptions, and the new regime with reduced tax rates and no deductions. While the new tax regime is now set as the default, taxpayers still have the flexibility to opt for the old regime during filing.
Here’s a comparison of the tax slabs under the new tax regime introduced in the 2024 budget:
2024 New Tax Slab Rates
- Income up to ₹3,00,000 –Nil
- ₹3,00,001 to ₹6,00,000 –5%
- ₹6,00,001 to ₹9,00,000 –10%
- ₹9,00,001 to ₹12,00,000 –15%
- ₹12,00,001 to ₹15,00,000 –20%
- Above ₹15,00,000 –30%
These revised slabs are a continuation of efforts made in previous budgets, particularly the 2023 financial plan, but have been adjusted to accommodate inflation and changing economic conditions.
Tax Rebate and Relief Measures
Rebate under Section 87A
One of the most significant reliefs in the 2024 tax structure is the enhancement of the rebate under Section 87A. Taxpayers with an income up to ₹7,00,000 are eligible for a full rebate, which means their tax liability is effectively zero under the new regime.
This step aims to support the lower-income and middle-class groups, allowing more financial flexibility and encouraging spending, which can have a positive ripple effect on the economy.
Standard Deduction and Other Benefits
Unlike earlier versions of the new regime, the 2024 budget allows a standard deduction of ₹50,000 even under the new system. This inclusion is a welcome relief for salaried individuals and pensioners, aligning the benefits closer to those available in the old regime.
Other key allowances such as family pension deductions (up to ₹15,000) are also included, further easing the tax burden under the new system.
Who Should Opt for the New Tax Regime?
The choice between the old and new tax regimes depends on individual income levels, investment habits, and financial goals. The new tax regime benefits individuals who do not claim multiple deductions under sections like 80C, 80D, HRA, or home loan interest.
Here’s who may benefit most from the new regime:
- Young professionals without major investments
- Individuals not paying rent or living with parents
- Salaried persons with limited deductions and allowances
- Senior citizens with simplified sources of income
Meanwhile, taxpayers with housing loans, insurance plans, PPF contributions, or education expenses might find the old regime more beneficial due to the availability of numerous exemptions.
Impact on Different Income Groups
Low-Income Individuals
For taxpayers earning up to ₹7 lakh, the new regime offers a clear advantage due to the rebate under Section 87A. These individuals pay no income tax and enjoy a simplified filing process with fewer documents and calculations.
Middle-Income Earners
Those earning between ₹7 lakh and ₹15 lakh can save tax under the new regime, provided they are not using multiple deductions. The simplified structure means fewer complications, especially for those who prefer minimal paperwork and easy compliance.
High-Income Earners
For individuals earning above ₹15 lakh annually, the tax rate remains at 30% under both regimes. The decision for this group hinges on how much they invest or claim as deductions. If the total deductions under the old regime exceed ₹3-4 lakh, it might still offer better tax savings.
Filing Process and Compliance
The 2024 tax system encourages digital filing and transparent reporting. Taxpayers must choose their preferred regime while filing returns. Salaried employees must inform their employer of their tax regime preference at the start of the financial year.
In case no choice is made, the new tax regime is considered by default. However, taxpayers can still switch during the filing of returns if they do not have income from business or profession.
Key Highlights of Budget 2024 Related to Tax
- Default adoption of new tax regime for individuals
- Increased rebate limit under Section 87A to ₹7 lakh
- Introduction of standard deduction in the new regime
- Focus on simplification and digitization of tax systems
- No changes to corporate tax or GST structures in this budget
Challenges and Criticism
Despite the benefits, the new tax slab system has faced some criticism. Financial advisors point out that taxpayers who rely on tax-saving instruments might not see advantages under the new regime. Additionally, the lack of flexibility in claiming deductions may discourage long-term savings and insurance coverage, which are often promoted through Section 80C and related provisions.
Taxpayers must carefully assess the pros and cons before making a permanent switch to the new system, especially since only non-business individuals can toggle regimes every year.
The New Budget 2024 tax slab reforms are designed to simplify income tax compliance and reduce the burden on a large section of the population. With its streamlined structure and inclusive benefits like a standard deduction and rebate extension, the new tax regime becomes more competitive with the old system. However, taxpayers need to evaluate their individual situations to determine which tax regime is more beneficial. Strategic planning and early decision-making can result in optimal tax savings under the 2024 tax framework. As tax laws evolve, staying informed remains the key to financial success and smart money management.