With the start of the new fiscal year (FY 2024-25), there will be some noteworthy changes. These changes will be implemented from April 1, 2024. The corresponding changes from April 1, 2024, will add new regulations or reforms to the prevailing ones. India’s Finance Minister, Smt. Nirmala Sitharaman has presented several new income tax rule changes in the budget 2023.
It is important to note that this new tax regime has been introduced as the default tax regime. From fiscal year 2023-24 (from April 1, 2023), taxpayers will have to opt for either the old tax regime or the new tax regime, and the new tax regime will be the default tax regime for FY 2023-24. Let’s go through some prominent changes that will affect taxpayers in this financial year.
According to the announcement made under the budget, the revised tax slab applies to the new tax regime. The corresponding changes from April 1, 2024, are highlighted below.
Total Income | Tax rate |
₹0 to ₹3,00,000 | 0% |
₹3,00,001 to ₹6,00,000 | 5% |
₹6,00,001 to ₹9,00,000 | 10% |
₹9,00,001 to ₹12,00,000 | 15% |
₹12,00,001 to ₹15,00,001 | 20% |
Above ₹15,00,000 | 30% |
The following are the advantages of the new tax regime to taxpayers:
The following table shows the updated surcharge rate according to the new tax regime:
Taxable Income Limit | Surcharge Rate on the Value of Income Tax | |
Before Introducing Budget 2023 | After Introducing Budget 2023 | |
< ₹50 lakhs | 0% | 0% |
₹50 lakhs to ₹1 Crore | 10% | 10% |
₹1 Crore to ₹2 Crore | 15% | 15% |
₹2 Crore to ₹5 Crore | 25% | 25% |
> ₹5 Crore | 37% | 25% |
The introduction of the new tax regime has increased the rebate limit. As per the old tax regime, the applicable rebate limit is Rs.12,500 for incomes up to Rs.5 lakhs. However, under the new tax regime, this rebate limit has increased to Rs.25,000 if the taxable income is less than or equal to Rs.7 lakhs. Note that the Section 87A rebate is applicable under both income tax regimes. Then, the budget announcement increased the taxable limit to Rs.7 lakhs from Rs.5 lakhs under the new tax regime.
Salaried individuals' standard deduction under both the old and the new regime is Rs.50,000.
Under the new tax regime, you will obtain an exemption on leave encashment. In the budget 2023, the exemption limit for leave encashment was raised 8 times i.e. from Rs. 3 lakhs to Rs. 25 lakhs for non-government employees. So, at retirement, the leave encashment amounting up to Rs. 25 lakhs is free from tax, as per Section 10(10AA).
The presumptive scheme of taxation is a simplified method provided by tax authorities to compute taxable income for certain eligible businesses or professions. Under this scheme, taxpayers are allowed to declare income at a prescribed rate based on certain presumptions rather than maintaining detailed books of accounts and undergoing complex calculations. The presumptive tax scheme works identically in both the old and new tax regimes.
Category | Turnover Receipts Before Budget 2023 | Turnover Receipts After Budget 2023 |
Small Business Owners (as per Section 44AD) | Rs. 2 Crore | Rs. 3 Crore* |
Specified Professionals (such as lawyers, doctors, freelancers, engineers, interior decorators, etc. (as per Section 44ADA) | Rs. 50 lakhs | Rs. 75 lakhs* |
The increase in limits is subject to a condition that 95% of the receipts must be through online modes.
Related Articles:
1. New Tax Regime 2024: All Your Questions Answered
2. Ways to Save Income Tax On New Tax Regime for FY 2023-24
3. Will the old tax regime be discontinued?
The FY 2024-25 presents new tax reforms, impacting income tax slabs, surcharge rates, rebate limits, standard deductions, leave encashment exemptions, switching between old and new tax regimes, and changes in presumptive taxation. Noteworthy changes starting from April 1, 2024, include raised exemption limits and reduced surcharge rates for the new tax regime. Taxpayers can expect simplified tax planning and an increased basic exemption limit under the new tax regime.