New Tax Regime Announcement:
Union Finance Minister Nirmala Sitharaman announced on Tuesday, July 23, an increase in the standard deduction to ₹75,000 from the current ₹50,000 under the new tax regime. This change allows salaried employees to save ₹17,500 in income tax.
Revised Tax Structure:
₹0-3 lakh: Nil (unchanged)
₹3-7 lakh: 5% (previously 5% for ₹3-6 lakh)
₹7-10 lakh: 10% (previously 10% for ₹6-9 lakh)
₹10-12 lakh: 15% (previously 15% for ₹9-12 lakh)
₹12-15 lakh: 20% (unchanged)
Above ₹15 lakh: 30% (unchanged)
Standard Deduction Details:
The standard deduction is a fixed amount that taxpayers can deduct from their taxable income without needing receipts or proof of expenses. This reduces the taxable income and, consequently, the overall tax liability. In addition to this change, the government announced a comprehensive review of the Income Tax Act to make it more user-friendly. FM Sitharaman also mentioned plans to introduce a standard operating procedure (SoP) for TDS defaults and to simplify the process for compounding such offenses.
New Tax Regime Adoption:
Over two-thirds of individuals have opted for the new income tax regime, Sitharaman informed the Lok Sabha.
Previous Year’s Budget:
In the last financial year’s budget, FM Sitharaman proposed a standard deduction of ₹50,000 for salaried individuals and pensioners under the new tax regime. This deduction applies by default unless taxpayers choose to opt-out. Additionally, the income threshold eligible for tax relief under Section 87A was raised to ₹7 lakh.
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