The start of the new financial year on 1st April 2024 is always noteworthy in terms of personal finances because it signifies the implementation of the majority of budget’s income tax proposals. Furthermore, additional changes are also applicable that might have an effect on people’s personal finances. Finance Minister made these announcements during this year’s budget speech. Here are some of the most significant adjustments that you should be aware of, including increased basic exemption limits.
1. New Tax Regime is the default tax regime
In addition to the existing tax slabs, a new tax slab was introduced in Budget 2020. Change is the default adoption of the new tax regime. The tax rates under this regime are lower than the old tax regime. Its goal is to expedite the tax filing process and encourage more people to file under the new tax system which has lower tax rates but fewer exemptions and deductions. This regime was introduced with the intention of simplifying the taxes, In the event that it is more advantageous for them, taxpayers will still be able to continue under the previous tax system. Section 87A rebate increased from Rs 5 lakh (tax rebate of Rs 12,500) to Rs 7 lakh (taxable income of Rs 25,000). This essentially means that no taxes will be paid by anyone choosing the new tax regime and having taxable income up to Rs 7 lakh. This tax rebate was previously available up to a taxable income of Rs 5 lakh.
New regime
| income | Income tax rates |
| 3,00,000 | – |
| 3,00,001-6,00,000 | 5%(tax rebate u/sec87A) |
| 6,00,001-9,00,000 | 10%
(tax rebate u/sec87A up to 7,00,000) |
| 9,00,001-12,00,000 | 15% |
| 12,00,001-15,00,000 | 20% |
| >15,00,000 | 30% |
Changes made:
- Basic exemption limit hiked to Rs 3 lakh from Rs 2.5 lakh in the new tax regime
- The number of income tax slabs under the new tax regime reduced to five from six
- Standard deduction of Rs 50,000 introduced under the new tax regime for salaried and pensioners
- Family pensioners can also claim standard deduction of Rs 15,000 under the new tax regime
- Highest surcharge rate of 37% reduced to 25% under the new tax regime
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2. Life insurance taxation
As per the announcement by the Finance Minister, the core tax amendments maturity proceeds from life insurance policies which are issued on or after April 1, 2023, and where the total premium exceeds ₹ 5 lakh, will be subject to taxation. Furthermore, non-government employees will benefit from an increased tax exemption limit on leave encashment upon retirement, raised from Rs 3 lakh to Rs 25 lakh.
3. Exemption of Enhanced Leave Encashment
Since 2022, non-government employees have been exempt from paying taxes on their leave encashment, which has now been raised to ₹ 25 lakh.
4. Surcharge on Income Tax
The income tax laws stipulate that if a person’s taxable income is more than Rs 50 lakh, they will be subject to a surcharge. The government modified the surcharge rates under the new tax structure starting in FY 2023–2024. On April 1, 2023, the new surcharge rates went into force. For the fiscal year 2024–2025, the income tax slabs, income tax rates, and surcharge rates remain the same.
| Surcharge rate from April 1, 2023 under new tax regime | |||
| Income range | Surcharge rate | ||
| Up to Rs 50 lakh | Nil | ||
| More than Rs 50 lakh but up to Rs 1 crore | 10% | ||
| More than Rs 1 crore but up to Rs 2 crore | 15% | ||
| More than Rs 2 crore | 25% | ||
However, individuals opting for the old tax regime in FY 2023-24 will continue to pay the surcharge rate they were paying in the previous financial years. in other words, if the individual opts for the old tax regime, a surcharge rate of 37% will be applicable.
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5. Decreased Corporate Tax Rates
In a bid to stimulate investment, the government has slashed corporate tax rates from 30 per cent to 22 per cent for existing domestic companies. Additionally, a new lower rate of 15 per cent has been introduced for certain new manufacturing entities, aimed at fostering fresh investments in the sector.
Read also: Tax Loss Harvesting – How it works everything you should know
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