Finance Minister Nirmala Sitharaman presents the Union Budget for the 2024-25 fiscal year on July 23, 2024. The budget 2024 income tax has also been released. This is the first full-year budget of the new government after its re-election for a third term. Many hope that Sitharaman will introduce measures to ease the financial burden on middle-class taxpayers. Rajeev Singh, Head of Bancassurance, CSB bank says, “The government is expected to focus on supporting personal consumption in this Budget. Consequently, some relief for taxpayers is anticipated.”
Understanding Budget 2024 Income Tax
The budget 2024 income tax introduces new tax slabs for the fiscal year 2024-25. Here’s a breakdown of the current rates:
No tax on income up to Rs 3 lakh.
5% tax on income between Rs 3 lakh and Rs 7 lakh.
10% tax on income between Rs 7 lakh and Rs 10 lakh.
15% tax on income between Rs 10 lakh and Rs 12 lakh.
20% tax on income between Rs 12 lakh and Rs 15 lakh.
30% tax on income above Rs 15 lakh.
Standard Salary Deduction Limit
The standard salary deduction from the previous year is Rs 50,000. This applies to both the old and new tax regimes starting from the financial year 2023-24. However, now the standard salary deduction limit is to be changed and increases from 50000 to 75000 in the new fiscal year according to the finance minister. However, the pension for old people is likely to be increased from INR 15000 to INR 25000.
“As a result of these proposals, revenue of about ₹ 37,000 crore – ₹ 29,000 crore in direct taxes and ₹ 8,000 crore in indirect taxes – will be forgone while revenue of about ₹ 30,000 crore rupees will be additionally mobilized. Thus, the total revenue forgone is about ₹ 7,000 crore annually.” FM Sitharaman said.
Why You Might Pay More Tax on Rs 10 Lakh Income
Not adjusting for inflation in tax brackets means higher taxes. Starting from the 2012-13 inflation figures, it shows taxpayers are paying more than necessary. In the old regime, income above Rs 5 lakh faces excess taxes. In the new budget 2024 income tax regime, this threshold is Rs 15 lakh. For example, with an income of Rs 10 lakh, excess taxes in the old regime were Rs 43,226, or Rs 3602 per month. For an income of Rs 20 lakh, excess taxes are Rs 1.84 lakh in the old regime and Rs 67,978 in the new regime.
This is because of the progressive tax system in India. In progressive tax system the tax increases as the people’s income increases. Therefore as the income will increase the tax will also increase.
The Consequences of Budget 2024 Income Tax
The lower income tax on the people’s wages and salaries would result in higher disposable income for the people due to which people will be able to have enough money to reduce poverty and increase their living standards in India. Moreover, people will have more ability to buy goods and services in the state which would raise the demand of goods and services therefore more businesses are likely to open and the supply would increase which would employ people therefore this will further reduce unemployment in India.
However, lower income tax could have a negative impact on the country’s economy as well. The government might get very little tax revenue due to which it might not be able to spend on public goods like roads and basic commodities and services like health and education leading to deprivation of these necessities in India.
Moreover, when the income tax is lowered the disposable income of people will be more therefore they have enough money to export the goods and services due to more disposable income which could lead to negative balance of payment of the government of india as the imports are likely to exceed the imports.
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