Income Tax Slabs Under New Regime Revised, Standard Deduction Increased: Finance Minister Lays Budget 2024

Union Finance Minister Nirmala Sitharaman today revised the Direct Income tax rates under the new regime.The revised rates are as follows:0-3L income- nil tax3-7L income- 5% tax7-10L income- 10% tax10-12L income- 15% tax12-15L income- 20% taxAbove 15L income- 30% taxEarlier, the rates under the new regime were as follows:0-3L: nil3-6L: 5%6-9L: 10%9-12L: 15%12-15L: 20%Above 15L: 30%Sitharaman presented the Budget for the 7th time. She has also enhanced the Standard deduction under the new regime from Rs. 50,000 to Rs. 75,000.The implication is as follows:-Rs 5,200 tax benefit for those salaried above Rs 8 lakh-Rs 17,500 tax benefit for those salaried Rs 15 lakh and aboveThe rates under the old tax regime remain unchanged. They are as follows:0-2.5L- nil2.5-5L- 5%5-10L- 20%Above 10L- 30%So far as tax re-assessment is concerned, the Finance Minister said that Re-assessment can be initiated after 3 years only if escaped income is more than Rs 50 lakh.Standard Deduction & Deduction on Family PensionThe existing provision of clause (ia) of section 16 of the Income tax Act provides that a deduction of fifty thousand rupees or the amount of the salary, whichever is less, shall be made before computing the income under the head “Salaries”. Further, the existing provision of clause (iia) of section 57 of the Act provides that in the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and one-third per cent of such income or fifteen thousand rupees, whichever is less, shall be made before computing the income chargeable under the head "Income from other sources". Therefore, with the aim of encouraging and incentivizing taxpayers (specially the salaried taxpayers) to shift to the new tax regime, the finance minister in the Union Budget 2024-25 proposes to insert a proviso after clause (ia) of section 16 to provide that in a case where income-tax is computed under clause (ii) of sub-section (1A) of section 115BAC of the Act, the provisions of this clause shall have effect as if for the words “fifty thousand rupees”, the words “seventy five thousand rupees” had been substituted. The finance minister also proposes to insert a proviso in clause (iia) of section 57 to provide that in a case where income-tax is computed under clause (ii) of sub-section (1A) of section 115BAC of the Act, the provisions of this clause shall have effect as if for the words “fifteen thousand rupees”, the words “twenty-five thousand rupees” had been substituted. Deduction On Non-Government Employer's Contribution To Pension SchemeSimilarly, Finance Minister proposed an amendment in the Income tax Act to enhance the amount allowed as deduction under Pension Scheme as per Section 80CCD.Section 36 of the Income tax Act pertains to other deductions allowed while computing the income under the head 'Profits and gains of business or profession'. Clause (iva) of sub-section (1) of said section states that any sum paid by the assessee as an employer by way of contribution towards a pension scheme, as referred to in section 80CCD of the Act, on account of an employee, to the extent it does not exceed ten per cent of the salary of the employee in the previous year, shall be allowed as a deduction to the employer. Hence, the finance minister proposes to amend clause (iva) of sub-section (1) of section 36 of the Act, to increase the amount of employer contribution allowed as deduction to the employer, from the extent of 10% to the extent of 14% of the salary of the employee in the previous year. Similarly, section 80CCD deals with deduction in respect of contribution to pension scheme of Central Government. Sub-section (2) of section 80CCD states that any contribution by the Central Government or State Government or any other employer to the account of an employee referred to in sub-section (1), shall be allowed as a deduction as does not exceed (a) 14% (where such contribution is made by the Central Government or State Government); and (b) 10% (where such contribution is made by any other employer) of the employees' salary in previous year. The finance minister therefore proposes to amend sub-section (2) of section 80CCD of the Act, to provide that where such contribution has been made by any other employer (not being Central Government or State Government), the employee shall be allowed as a deduction an amount not exceeding 14% of the employee's salary. This is being increased only in the case where the employee's salary is chargeable to tax under sub-section (1A) of section 115BAC of the Act.Donations Made To National Sports Development Fund Eligible For Section 80G DeductionFinance Minister also said, “Any sums paid as donations to the National Sports Fund set up by the Central Government are presently eligible for deduction under section 80G. The name of the fund is proposed to be corrected as National Sports Development Fund.”As per section 80G(1) in computing the total income of an assessee, there shall...

Income Tax Slabs Under New Regime Revised, Standard Deduction Increased: Finance Minister Lays Budget 2024

Akshita Saxena

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