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Budget 2024: Now ZERO tax on annual income up to Rs 8.5 lakh if basic exemption hiked to Rs 5 lakh | Here are possible tax slab changes – Budget 2024 News

Union Budget 2024: Finance Minister Nirmala Sitharaman will present her first budget in the Modi 3.0 regime on July 23 in Parliament. Overall, this will be her seventh straight budget presentation with an interim one presented in February this year.

With just a fortnight to go before the Union Budget 2024, taxpayers, especially those in the middle-class, are hoping for some much-needed tax relief measures from the Modi government. They are particularly looking for the government to raise the basic exemption limit from Rs 3 lakh to Rs 5 lakh, increase the standard deduction limits, and introduce new deduction benefits under the new tax regime.

What are the deduction benefits available currently under new tax regime?

Currently, the new tax regime only offers a standard deduction benefit of Rs 50,000, with no other deductions and exemptions like those available under the old tax regime.

short article insert In the upcoming budget, experts too anticipate a significant change in the tax structure. They are of the view that the government may increase the basic tax exemption limit under the new tax regime from Rs 3 lakh to Rs 5 lakh per annum.

Also read: ITR Filing: You don’t need to pay taxes on THESE 12 income sources

What will be tax-free income under new tax regime if basic exemption limit hiked to Rs 5 lakh?

If this hike is implemented, it would mean that individuals with an annual income of up to Rs 8.5 lakh could potentially pay no income tax. This calculation takes into account the standard deduction and the rebate under section 87A, assuming it remains unchanged, feels CA Satish Surana.

According to him, such a move would provide substantial relief to middle-income earners, significantly increasing the tax-free income limit and boosting disposable income for millions of taxpayers.

Income up to Rs 7.5 lakh is tax-free with Rs 3 lakh exemption and Section 87A rebate

Currently, with a Rs 3 lakh exemption limit, income up to Rs 7.5 lakh is tax-free after considering Standard Deduction and Rebate under section 87A.

Current tax slabs under the new tax regime:

Tax slabs Tax rate
Up to Rs 3 lakh 0%
Rs 3 lakh to Rs 6 lakh 5% (Tax rebate u/s 87A)
Rs 6 lakh to Rs 9 lakh 10% (Tax rebate u/s 87A up to Rs 7 lakh)
Rs 9 lakh to Rs 12 lakh 15%
Rs 12 lakh to Rs 15 lakh 20%
Above Rs 15 lakh 30%

Revised Tax Slabs (Assumed):

Tax slabs (assumed under new tax regime) Tax rate
Up to Rs 5 lakh 0%
Rs 5 lakh to Rs 6 lakh 5% (Tax rebate u/s 87A)
Rs 6 lakh to Rs 9 lakh 10% (Tax rebate u/s 87A on income up to Rs 8 lakh)
Rs 9 lakh to Rs 12 lakh 15%
Rs 12 lakh to Rs 15 lakh 20%
Rs 15 lakh and above 30%

Note: These are illustrative slabs to demonstrate how the adjustments might look with an increased exemption limit. Actual tax slabs and rates would depend on the government’s tax policy decisions.

Also read: Middle-class ‘very angry’ and ‘upset’ over high taxes, poor quality of life, feels Mohandas Pai as he seeks tax relief in Budget

Tax-free income limit with a Rs 3 lakh and Rs 5 lakh exemption limit:

Under the current scenario, with an exemption limit of Rs 3 lakh, the tax-free income limit includes several components. First, there is a standard deduction of Rs 50,000. Additionally, a tax rebate under section 87A is available, providing up to Rs 25,000 in relief if the taxable income is Rs 7 lakh or less. As a result, the taxable income up to which no tax is payable is Rs 7.5 lakh, factoring in the Rs 50,000 standard deduction.

Revised Scenario (Exemption Limit Rs 5 lakh):

In the revised scenario, with an increased exemption limit of Rs 5 lakh, the tax-free income limit changes significantly. The standard deduction remains at Rs 50,000. The tax rebate under section 87A would also need to be applicable, providing Rs 25,000 in relief if the taxable income is Rs 8 lakh or less. Consequently, the taxable income up to which no tax is payable would be Rs 8.5 lakh, including the Rs 50,000 standard deduction.

Here’s the table illustrating the tax-free income limits under both scenarios:

Exemption limit (Rs) Standard Deduction (Rs) Tax rebate (Rs) Tax-free income limit (Rs)
Rs 3 lakh Rs 50,000 Rs 25,000 (u/s 87A) Rs 7,50,000
Rs 5 lakh Rs 50,000 Rs 25,000 (u/s 87A) Rs 8,50,000

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