After the revision of income tax slabs, there is no tax liability for income up to ₹3 lakh. However, as the changes announced in Budget 2024 come into effect, the income bracket up to ₹7 lakh — instead of only till ₹6 lakh earlier — will now attract 5 percent tax rate. Likewise, 10 percent tax liability will be levied on income up to ₹10 lakh instead of only ₹9 lakh earlier.
Tax rates for other income brackets continue to remain the same.
However, another key change that Sitharaman has introduced relates to higher standard deduction, which was raised from ₹50,000 to ₹75,000 from FY 2024-25.
Collectively, these changes can enable a salaried taxpayer (in the 30 percent tax bracket) to save up to ₹17,500 in total tax outgo under the new tax regime.
“As a result of these changes, a salaried employee in the new tax regime stands to save up to ₹17,500 in income tax,” Finance Minister Nirmala Sitharaman said during the Budget speech in Parliament on Tuesday.
Let us understand how this ₹17,500 was calculated
Suppose a taxpayer earns ₹15,00,000 and thereby falls in the 30 percent tax bracket.
I. For ₹3-6 lakh income, tax liability is ₹15,000 as per current rates whereas it is 20,000 as per the latest changes. There is an additional tax of ₹5,000 which is -5,000.
II. For income of ₹9-12 lakh, tax liability is 15 percent as per the current rates, which becomes ₹45,000. As per the new slabs, tax liability for income between ₹10 and 12 lakh is 15 percent, thus bringing the tax amount to ₹30,000. The total saving here is ₹15,000 (45,000 – 30,000).
III. When you factor in both I and II, the total saving is ₹10,000 (15,000 -5,000).
IV. There is an additional standard deduction of ₹25,000 for someone with 30 percent tax bracket, this leads to the total saving of ₹7,500 (30% of 25,000).
When you add III and IV, the total savings become ₹17,500.
So, this is how a taxpayer who earns ₹15,00,000 stands to save ₹17,500 with implementation of new rates under the new tax regime.
