Our F.M presented the budget speech in parliament on 23^rd July 2024 and has announced significant relaxations in the income tax slabs under the new tax regime for FY 2024-25.

New Tax Regime

What deductions and exemptions are allowed under the new tax regime?
Here is a comparison between the deductions and exemptions available under the new and the old tax regime:

The government in Budget 2024 introduced some key changes, which remains the same even for FY 2024-2025, to encourage taxpayers to adopt the new regime.

They are:
a) Higher Tax Rebate Limit and Marginal Relief: Rebate u/s 87A  is available for Resident Individual having Total Income up to Rs.7, 00,000/-
1) 100% of tax payable, or
2) Rs. 25,000/-
Whichever is Lower

Marginal Relief:
If total income more than Rs. 7,00,000/- but does not exceed Rs. 7,27,770/-, tax on such income cannot exceed the amount by which the Total Income exceeds Rs. 7,00,000/-. However marginal relief not available in case of regular tax regime.

b) Comparison Chart of both Old and New Tax Regime.

c) Standard Deduction and Family Pension Deduction:

Salary income: The standard deduction of ₹50,000, which is available under the old regime, has now been extended to the new tax regime as 75,000. This, along with the rebate, makes ₹7.75 lakhs as your tax-free income under the new regime.
Family pension: Those receiving family pension can claim a deduction under Old scheme of: ₹15,000 or 1/3rd of pension, whichever is lower.
And in New Scheme it is ₹25,000 or 1/3rd of pension, whichever is lower.

d) Reduced Surcharge for High Net worth Individuals: The surcharge rate on income over ₹5 crores has been reduced from 37% to 25%. This move will bring down their effective tax rate 42.74% to 39%. (Same as in Previous F.Y 2023-24)

e) Higher Leave Encashment Exemption: The exemption limit for non-government employees has been raised from ₹3 lakhs to ₹25 lakhs, an 8-fold increase. (Same as in Previous F.Y 2023-24)

f) Default Regime: Starting from FY 2024-25, the new income tax regime will be set as the default option. If you want to continue using the old regime, you must submit a form at the time of return filing. You will have the option to switch between the two regimes annually.

Old Tax Regime
The old regime is the tax system that prevailed before the introduction of the new regime. Under this regime, there are over 70 exemptions and deductions available, including HRA and LTA that can reduce your taxable income and lower tax payments. The most popular and generous deduction is Section 80C, which allows for a reduction of taxable income up to Rs.1.5 lakh. The taxpayers are given a choice between the old and the new tax regime.

The decision to switch to the new or remain in the old tax regime or which regime is better for you shall be based on the tax savings deductions and exemptions you are eligible for in the old tax regime.

Conclusion: A thorough comparison of the two regimes is necessary to determine the best fit for each person. If your income is up to 15.00Lacs then Tax will be approx. ₹ 1, 30,000/- under new scheme which will be offset under old scheme only if your deduction are up to ₹ 4,08,333/- including HRA, Home Loan Interest, 80 D and several Chapter VI Deductions.