The popular demand to help put more money in the hands of the aam aadmi was heard by the Finance Minister. The Budget has reduced the tax rates under specific slabs along with an increase in the standard deduction for the salaried class and enhanced deduction in the case of family pension. These changes will be applicable from FY24-25 i.e. assessment year 2025-26.
Nudge towards the new tax regime
This changes announced further cement the intention of the government to encourage choosing the new tax regime, as all the above changes were brought under the new regime while the old regime remains untouched.
Standard deduction has been raised for the salaried class from ₹50,000 to ₹75,000 which is expected to directly benefit the masses. Deduction has also been enhanced for income in the form of family pension. Earlier allowed as the lower of one-third of such income or ₹15,000, it has now been bumped up to one-third of such income or ₹25,000, whichever is lower.
The two changes along with lower tax outgo as discussed below are expected to put more money in the hands of the taxpayer. These moves, along with the measures announced for rural India, could do their bit for boosting consumption as disposable income increases.
How much savings
For a gross total income for various levels beginning from ₹7.75 lakh to ₹20 lakh, a salaried taxpayer who chooses the new tax regime would save tax handsomely anywhere from ₹13,000 to ₹26,000 as illustrated in the accompanying table. It must be noted that at the income level of ₹7.75 lakh, an assessee pays no tax at all now, compared with ₹26,000 he/she would have paid earlier.
Individuals with business/profession
The accompanying table illustrates the benefits for non-salaried individuals with two income levels - ₹9 lakh and ₹18 lakh. A non-salaried taxpayer who chooses the new tax regime would save between a minimum of ₹5,200 and maximum of ₹10,400.
Impact on senior citizens
Unlike the old regime, the New Tax regime does not have any differentiation in slabs or rates for senior citizens. This implies that those over 60 years of age or over 80 years of age, would see the same benefits as illustrated above.