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Informist, Tuesday, Jul 23, 2024

NEW DELHI – The government today announced measures to reduce the tax burden of individuals under the new tax regime, including raising the standard deduction to 75,000 rupees from 50,000 rupees and tweaking the tax slabs under the new income tax regime. 

The full Budget also proposed to increase the deduction on family pension to 25,000 rupees.

Presenting the Budget for 2024-25 (Apr-Mar), Finance Minister Nirmala Sitharaman said the tax changes will allow a salaried employee to save up to 17,500 rupees in income tax under the new tax regime.

Sitharaman's move comes against the backdrop of experts batting for the need to increase disposable income in the hands of taxpayers to boost consumption in the economy. Informist had on Jun 18 reported that the finance ministry was considering rationalising income tax rates as a way to infuse money into the system so that it has a multiplier effect on the economy.

The finance minister proposed changes to three income tax slabs under the new tax regime. She proposed to tax income between 300,000 to 700,000 rupees at 5% tax instead of 300,000 to 600,000 rupees earlier. Similarly, slabs of 600,000 to 900,000 rupees and 900,000 to 1.2 mln rupees have been changed to 700,000 to 1 mln rupees and 1 mln to 1.2 mln rupees, respectively. The tax for these two slabs will remain at 10% and 15%, respectively. There is no change in other tax slabs.  

A tepid consumption in the economy was one of the reasons cited for the National Democratic Alliance coming back to power with a sharply reduced majority. In the elections, the Bharatiya Janata Party's tally came down to 240 seats from 303 in 2019, while the number of seats of the ruling coalition fell to 292 seats from 353 seats.

In today's Budget, Sitharaman also increased deductions for family pensions under the new tax regime to 25,000 rupees from the current 15,000 rupees. The measure will provide relief to about 40 mln salaried individuals and pensioners, Sitharaman said in her speech.

She also proposed increasing the deduction allowed for non-government employers for contributing to the New Pension System from the current 10% of salary to 14% of salary. 

The government will forgo about 290 bln rupees annually because of the direct tax proposals, she said. End

Reported by Priyasmita Dutta

Edited by Saji George Titus

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