Finance Minister Nirmala Sitharaman will present the first Budget 2024 of the Modi 3.0 government on July 23, 2024. There is more hope that changes can be made in the new income tax regime – perhaps increasing the basic exemption limit, hiking standard deductions, or / and rationalizing slabs income tax and higher tax rates.
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So what can taxpayers expect from Budget 2024 for the new income tax regime? Times of India Online conducted an exclusive survey of top personal tax experts. Here’s what they had to say:
What Should be the Ideal Tax Slab, Rates Under the New Income Tax Regime?
Tax experts are divided on the appropriate income tax slabs and income tax rates under the new tax regime. However, most agree that the 30% tax slab above Rs 15 lakh income is still steep and should be imposed on income above Rs 20 lakh at least.
Aarti Raote, Partner, Deloitte India said the government may not look at rejigging tax rates up to 25% slab under the new tax regime. However, the government may want to increase the threshold of Rs 15 lakh to Rs 20 lakh for the 30% tax rate under the new tax regime.
“Also, the basic exemption limit of Rs 3 lakh can be moved to Rs 5 lakh. Also, increasing the standard deduction to Rs 1 lakh from the existing level of Rs 50,000 will provide relief and encourage compliance,” he told TOI.
Chander Talreja, Partner, Vialto Partners told TOI, “This year, the government may provide relief to middle-income level individuals by increasing slab rates and introducing an additional slab for income between Rs 15 lakh and Rs 20 lakh.” Chander recommends the following income tax slabs and rates for taxpayers paying under the new income tax regime:
Preeti Sharma, Partner, Tax & Regulatory Services, BDO India LLP said that the applicable tax rate of 30% on income of Rs 15 lakh is a sharp increase from 5% at the income level of Rs 3 lakh. “The applicable tax rate for income of Rs 15 lakh should be reduced to 22-25% and another slab can be introduced by increasing the maximum tax rate to 30% for income levels of Rs 25 lakh and above,” Preeti told TOI.
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“This tax reduction will cause the government to lose direct tax collection, and also leave individuals with more income. It will also lead to more spending in the economy that will bring indirect tax collection to the government,” he added.
However, Surabhi Marwah, Tax Partner, EY India opined that the current slab is fine but the basic exemption should be raised to Rs 5 lakh. He also advocated lowering income tax rates to put more income in the hands of taxpayers.
Kuldip Kumar, Partner at Tax Advisors Mainstay said that the number of slabs should be brought down in the new regime. “Currently there are 7 tax slabs under the new regime. These should be rationalized to 3 or 4 at the most. The government has all the data about the income brackets and the number of taxpayers in it and the taxes they pay. Changes should be made so that the tax burden is reduced on the payers tax the lower and middle income groups,” he told TOI.
New Income Tax Regime: What is the Current Income Tax Slab?
There are significant changes in personal tax for individuals who opt for the new personal tax regime in Budget 2023 like the surcharge rate has been lowered from 37% to 25% for individuals with taxable income of more than Rs 5 crores, raising the basic exemption limit by Rs 50,000 , 100% tax rebate on income up to Rs 7 lakh. Therefore, the government provides benefits to low-income earners as well as high-income earners.
Currently, the income tax rates and slabs for the new income tax regime are:
The eligibility limit for the rebate is Rs 7 lakh, which means a tax deduction of up to Rs 25,000. There is marginal relief for individuals whose net taxable income exceeds Rs 7 lakh and whose additional income tax liability is higher than the additional income above Rs 7 lakh.
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Surcharge applies to income tax if total income exceeds Rs 50 lakh. The surcharge rates are: