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Finance Minister Nirmala Sitharaman Presents Budget 2024-25 with New Tax Regime Benefits

Under the new and simplified tax regime, Sitharaman liberalized income tax slabs and increased the standard deduction from ₹50,000 to ₹75,000

Editor Ritam English by Editor Ritam English
Jul 24, 2024, 06:21 am IST
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Union Finance Minister Nirmala Sitharaman presented the Budget 2024-25 in Parliament on Tuesday, announcing enhanced benefits for those opting for the new tax regime. However, individuals with higher incomes and substantial tax deductions may find the old tax regime more advantageous in the long term.

Under the new and simplified tax regime, Sitharaman liberalized income tax slabs and increased the standard deduction from ₹50,000 to ₹75,000. With these revisions, salaried individuals are encouraged to switch to the new tax regime. However, those claiming deductions up to ₹2 lakh on home loan interest or eligible for substantial house rent allowance (HRA) may still find the old tax regime more beneficial.

For instance, a salaried employee earning ₹11 lakh and claiming deductions over ₹3,93,750 would have a lower tax outgo under the old tax regime. While it’s uncommon for an individual with an ₹11 lakh income to claim such high deductions, a couple with dual incomes might. The old regime is also more suitable for individuals with an income around ₹60 lakh if they claim deductions exceeding ₹3,93,750. Conversely, for those with incomes up to around ₹7.75 lakh, the new tax regime is significantly more advantageous.

The old tax regime remains ideal for individuals earning over ₹10 lakh due to the flexibility in deductions, leading to greater savings for high-income earners.

**New Tax Regime for Low-Income Salaried Employees**

For the middle class, Sitharaman raised the standard deduction by 50 percent to ₹75,000 and adjusted tax slabs for those opting for the new tax regime. For earners below ₹7 lakh, the new regime can reduce tax outgo to zero. A salaried employee earning up to ₹7.75 lakh will not pay any taxes under the new regime, thanks to the increased deduction.

For those with significantly higher incomes, such as ₹6 crore, the new and simplified tax regime offers lower tax liabilities due to a reduced surcharge rate of 39 percent compared to the old regime.

In summary, individuals with substantial deductions and high incomes are likely to prefer the old tax regime, while those with incomes up to ₹7 lakh and over ₹5-6 crore will find the simplified regime more beneficial.

 

Tags: Nirmala SitharamanIncome TaxBudget 2024New Tax RegimeBudget 2024-25standard deductionold tax regimetax slabshouse rent allowance (HRA).
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