Budget 2024; Old Vs New Tax Regime Exemption Limit | Income Tax Slab Expected Changes | Modi government can increase the limit of income tax exemption: Expected tax exemption on income up to ₹ 10 lakh, changes in section 80C also possible

Due to it being an election year, Finance Minister Nirmala Sitharaman presented the interim budget for FY 2025 on 1 February.

Narendra Modi government may present the full budget for the financial year 2024-25 in the third week of July. In such a situation, middle class and taxpayers are expected to get relief. According to Reuters, Modi 3.0 is considering cutting income tax rates for people earning ₹10 lakh annually in its first budget.

Apart from this, the government is planning to make changes in the income tax slab. Due to it being an election year, Finance Minister Nirmala Sitharaman presented the interim budget for FY 2025 on 1 February. At that time the Finance Minister had not made any major announcement related to income tax.

Government may increase tax exemption limit to ₹5 lakh
In the budget, the government can give this relief to a particular salary class and middle class. At the same time, Moneycontrol quoted government sources as saying that the government may increase the income tax exemption limit from ₹ 3 lakh to ₹ 5 lakh in the budget. This change will be applicable only to those filing returns under the new tax regime.

Income up to Rs 3 lakh tax free in new tax regime
Suppose, someone’s annual income is Rs 5 lakh. In the new tax regime, income up to Rs 3 lakh is tax free. In such a situation, the person will be liable to pay tax at the rate of 5% on the remaining Rs 2 lakh. That means, he will have to pay tax of Rs 10,000. However, in this regime, the government waives tax on income up to Rs 7.5 lakh under Section 87A.

There is a catch in this also. If you are salaried and your earning is more than Rs 7.5 lakh by even one rupee, then you will have to pay tax not on one rupee but on Rs 4,50,001. Now after waiving the tax of Rs 3 lakh, out of the remaining Rs 4,50001, Rs 15,000 will have to be paid at the rate of 5% on Rs 3 lakh and Rs 15,000 at the rate of 10% on the remaining Rs 1,50,001.

20% tax on income of ₹ 10 lakh in the old tax regime
There are total 5 slabs of income tax in the old tax regime. In these, income up to ₹ 2.5 lakh is tax free. Income ranging from ₹2.5 lakh to ₹5 lakh is taxed at 5%. Whereas, 20% tax has to be paid on income of ₹5 lakh to ₹10 lakh. Income between ₹10 lakh to ₹20 lakh is taxed at 30% and those earning above ₹20 lakh have to pay 30% tax. Whereas, in the new tax regime, till now salary up to Rs 7 lakh comes under tax free ambit.

According to reports, changes in the income structure of up to Rs 10 lakh are expected in the budget. Currently, salary up to Rs 10 lakh is directly taxed at 20 per cent. The government can make changes in this. Tax from 20% on income up to Rs 10 lakh can be reduced to 10%. Apart from this, changing the 30% tax slab is also being considered.

Understand the old tax regime with an example
According to Bhopal’s CA Karthik Gupta, suppose someone’s annual income is Rs 5 lakh. In the old tax regime, income up to Rs 2.5 lakh is tax free. In such a situation, the person will be liable to pay tax at the rate of 5% on the remaining Rs 2.5 lakh. That means, he will have to pay tax of Rs 12,500. But the government waives this tax under Section 87A of the Income Tax Act.

There is also a screw in it. If your earning is more than Rs 5 lakh by even one rupee, then you will have to pay tax not on one rupee but on Rs 2.5 lakh. Now the tax liability on Rs 2.5 lakh at the rate of 5% will be Rs 12,500. On the remaining Rs 1, tax will have to be paid at the rate of 20%. That means, tax of Rs 12,501 will have to be paid.

Possibility of revision in section 80C limit
Despite rising inflation, the government has not made any changes in the 80C limit in the last 10 years. According to Archit Gupta, Founder and CEO of Clear Tax, this change will not only help taxpayers deal with inflation, but will also encourage savings and investment in saving schemes like ELSS, Tax Saver FDs, PPF.

You can save tax on investments from 80C to Rs 1.5 lakh
Many people start investing to save tax before the end of the financial year. Under Section 80C, you can claim a deduction of Rs 1.5 lakh from your total income. In simple language, you can reduce your total taxable income up to Rs 1.50 lakh through Section 80C. You can take advantage of this by investing in other schemes including term insurance, 5 year FD and senior citizen saving schemes.

Read this news also…

No relief in income tax: Income up to Rs 3 lakh will remain tax free, but under 87A, tax exemption up to Rs 7.5 lakh

The government has not given any relief in income tax to the common man in the interim budget. If you choose the old tax regime, your income up to Rs 2.5 lakh will still remain tax free. However, under Section 87A of the Income Tax Act, you can save tax on income up to Rs 5 lakh. Click here to read full news