Budget'24: Will Old Tax Regime be ruled out next year?

New Delhi: India kicked off its financial deliberations by unveiling the budget on 23rd July. Finance Minister Nirmala Sitharaman introduced the budget. This also marks Modi 3.0 government’s third term. Notably, she presented the ‘Bahi Khata’ and it appears to offer some respite to salaried employees. The finance minister has implemented substantial alterations to the tax framework within the new tax regime.

What does the budget has for you?

The new tax regime is appealing and promising for salaried individuals. It seems its offering relief to the middle-class also. Under the updated regime, income from 0 to 3 lakh rupees is tax-free, whereas previously, the regime taxed income from 3 lakh rupees to 6 lakh rupees at 5 %.

In FY 2024-25, the New Tax Regime taxes income

• 0-3 lakh rupees at 0%,
• 3-7 lakh rupees at 5%,
• 7 lakh to 10 lakh rupees at 10%,
• 10 lakh to 12 lakh rupees at 15%,
• 12 lakh to 15 lakh rupees at 20%,
• Over 15 lakh rupees at 30%.

The budget has changed the tax slabs for those earning between 3 lakh rupees and 12 lakh rupees. The Finance Minister addressed that due to these changes, salaried employees will save up to ₹17,500 in income tax under the New Tax Regime. There have been no changes in the slabs for income up to three lakh rupees and above twelve lakh rupees.

In Budget 2024-25, the government has increased the Standard Deduction limit for salary class employees under the New Tax Regime from ₹50,000 to ₹75,000. Similarly, they have raised the deduction on family pension for pensioners from ₹15,000 to ₹25,000.

Reason behind change in the income tax structure?

There has been a demand for continuous changes in the tax regime from salary class and experts. Experts believed that changes in the tax slabs would reduce tax liability, increase disposable income for the average salary class, boost consumption, and accelerate the economy. People in the old tax regime are disappointed because the government has made no changes. In fact, the government wants taxpayers to switch from the old tax regime with exemptions and deductions to the new tax regime. Therefore, like in Budget 2023, Budget 2024 too has seen a shift closer towards New Tax Regime. It remains to be seen if Old Tax Regime will be scrapped altogether next year.