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Every year, the most awaited announcement in the Union Budget is about the income tax slabs. So, will taxpayers get some relief this year? Let’s find out with insights from Bajaj Broking, because here, #BudgetSimpleHai!
This year, the government might have a bit more fiscal flexibility, which could mean good news for the middle-income group. According to media reports, the finance minister is planning to rationalize income tax slabs, especially for annual incomes between ₹15 lakh and ₹20 lakh. There’s also talk that the current income exemption limit might be increased from ₹3 lakh to ₹5 lakh.
If this tax cut happens, individuals with an annual income of up to ₹8.5 lakh could potentially pay no income tax, thanks to the rebate under Section 87A. This would directly impact your disposable income, giving you more money to spend. Imagine being able to save more or spend on things like a new TV, a vacation to Europe, or even a new car!
Experts believe that the government might make these changes to attract individuals to the new tax regime. Even if you’re not in the tax slab, this can have a positive long-term impact on industries and their stock prices due to higher consumer spending across sectors.
Right now, the new tax regime offers a standard deduction benefit of ₹50,000 but lacks other deductions and exemptions available under the old regime. Currently, with a ₹3 lakh exemption limit, income up to ₹7.5 lakh is tax-free, considering the Standard Deduction and Rebate under Section 87A.
Here are the current tax slabs under the new tax regime:
Tax Slabs | Tax Rate |
Up to ₹3 lakh | 0% |
₹3 lakh to ₹6 lakh | 5% (Tax rebate u/s 87A) |
₹6 lakh to ₹9 lakh | 10% (Tax rebate u/s 87A up to ₹7 lakh) |
₹9 lakh to ₹12 lakh | 15% |
₹12 lakh to ₹15 lakh | 20% |
Above ₹15 lakh | 30% |
If the exemption limit is increased to ₹5 lakh, the tax slabs might look something like this:
Tax Slabs (Assumed) | Tax Rate |
Up to ₹5 lakh | 0% |
₹5 lakh to ₹6 lakh | 5% (Tax rebate u/s 87A) |
₹6 lakh to ₹9 lakh | 10% (Tax rebate u/s 87A on income up to ₹8 lakh) |
₹9 lakh to ₹12 lakh | 15% |
₹12 lakh to ₹15 lakh | 20% |
Above ₹15 lakh | 30% |
If the exemption limit is raised to ₹5 lakh, individuals with an annual income of up to ₹8.5 lakh could potentially pay no income tax. This includes the standard deduction of ₹50,000 and the rebate under Section 87A. Here’s a table to illustrate the tax-free income limits under both scenarios:
Exemption Limit | Standard Deduction | Tax Rebate | Tax-Free Income Limit |
₹3 lakh | ₹50,000 | ₹25,000 (u/s 87A) | ₹7,50,000 |
₹5 lakh | ₹50,000 | ₹25,000 (u/s 87A) | ₹8,50,000 |
With just a few days to go before the Union Budget 2024, taxpayers, especially those in the middle-class, are hopeful for some much-needed tax relief measures. They are particularly looking for the government to raise the basic exemption limit from ₹3 lakh to ₹5 lakh, increase the standard deduction limits, and introduce new deduction benefits under the new tax regime.
Finance Minister Nirmala Sitharaman will present her first budget in the Modi 3.0 regime on July 23 in Parliament. Overall, this will be her seventh straight budget presentation with an interim one presented in February this year.
For all the latest updates, stay tuned to our website because with Bajaj Broking, #BudgetSimpleHai!
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