The beginning of the new financial year on April 1, 2024, marks the implementation of the Income Tax proposals announced by Finance Minister Nirmala Sitharaman during the Union Budget presentation in February. These changes aim to simplify the tax filing process and provide financial relief to various taxpayer segments. Here’s a concise overview of the seven crucial tax changes that will affect individuals and businesses alike.
- Default Adoption of the New Tax Regime: In an effort to streamline the tax filing process, the new tax regime will now be the default choice for taxpayers. This regime offers lower tax rates but limits deductions and exemptions. Taxpayers, however, retain the choice to stick with the old regime if it benefits them more.
- Revised Basic Exemption and Rebate Limits: The basic exemption limit under the new regime has been increased from Rs 2.5 lakh to Rs 3 lakh. Furthermore, the tax rebate under Section 87A is now extended to those with a taxable income of up to Rs 7 lakh, providing complete tax relief to eligible individuals.
- Updated Tax Slabs: The new regime introduces revised tax slabs aimed at reducing tax liabilities for middle-class taxpayers. The slabs range from a 5% tax rate for incomes between Rs 3 lakh to Rs 6 lakh, up to a 30% rate for incomes exceeding Rs 15 lakh.
- Standard Deduction Availability: A significant update includes the extension of the Rs 50,000 standard deduction to taxpayers under the new tax regime, previously exclusive to the old regime. This move aims to reduce taxable income and benefit a wider range of taxpayers.
- Surcharge Rate Reduction: High-income earners will see a decrease in the surcharge rate from 37% to 25% for incomes above Rs 5 crore. This change lowers the effective tax rate for affluent individuals under the new regime.
- Taxation on High-Premium Life Insurance Policies: Policies issued on or after April 1, 2023, with annual premiums exceeding Rs 5 lakh will now see their maturity proceeds subject to tax, aiming to bring fairness to tax treatment across financial products.
- Increased Leave Encashment Exemption: Non-government employees will benefit from a raised tax exemption limit for leave encashment upon retirement from Rs 3 lakh to Rs 25 lakh, providing substantial relief.
These tax reforms are part of the government’s broader agenda to foster economic growth, enhance tax compliance, and provide relief to taxpayers. As these changes come into effect, it’s essential for taxpayers to understand their implications and plan their finances accordingly.
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