Budget 2024 also provided for NPS Vatsalya, wherein parents can open an NPS account in the name of a minor child. This account can be converted into a normal NPS account after the child attains majority…reports Asian Lite News
Finance Minister (FM) Nirmala Sitharaman on Tuesday announced a revision in the new tax regime for the financial year 2024–25, realigning tax slabs to provide additional benefits to taxpayers opting for this structure.
“There are slight changes in the slab ranges while tax rates remain the same. Such changes are expected to save around Rs 17,500 in taxes,” said Ritika Nayyar, partner, Singhania & Co.
Incomes in the Rs 3-6 lakh slab were earlier subject to tax at the rate of 5 per cent. This tax rate will now apply to incomes in the Rs 3-7 lakh slab. Similarly, incomes in the slab of Rs 6-9 lakh were taxed at the rate of 10 per cent. This has now been revised to apply to incomes of Rs 7-10 lakh. The Rs 9 lakh to Rs 12 lakh slab now becomes Rs 10 lakh to Rs 12 lakh with a tax rate of 15 per cent.
The standard deduction for employees who choose to remain in the new tax regime under Section 115BAC has been increased from Rs 50,000 to Rs 75,000. “Salaried employees who opt for the old regime will get the standard deduction of Rs 50,000,” said Naveen Wadhwa, vice president, research and advisory, Taxmann.
The FM announced that more than two-thirds of tax filers availed of the new personal income tax regime in the last fiscal year. The above two changes will enhance the new tax regime’s attractiveness further.
“These adjustments (of tax slabs and standard deduction) will reduce the tax burden for salaried individuals with an income of around Rs 20 lakh by approximately Rs 18,000. For non-salaried individuals with the same income level, the savings will be around Rs 10,000,” said Ankit Jain, partner, Ved Jain & Associates.
One significant change proposed by the FM is an increase in the deduction for employer contributions to the National Pension System (NPS). It has been raised from 10 per cent to 14 per cent of the salary. “This benefit will be available under both tax regimes,” said Jain.
“The proposed increase in employer contributions to NPS reinforces the role of employers in fostering long-term financial and social security for their workforce,” said Ranbheer Singh Dhariwal, chief executive officer (CEO), Max Life Pension Fund Management.
Budget 2024 also provided for NPS Vatsalya, wherein parents can open an NPS account in the name of a minor child. This account can be converted into a normal NPS account after the child attains majority.
“The introduction of the NPS Vatsalaya scheme marks a significant step towards fostering a culture of long-term financial planning for minors in our country,” said Rahul Bhagat, CEO, DSP Pension Fund Managers.
The FM also announced a comprehensive review of the Income-Tax Act, 1961, to make it concise and easy to understand. “This may reduce confusion, disagreements, provide clarifications, and possibly minimise future litigation,” says Nayyar.
Kunal Savani, partner, Cyril Amarchand Mangaldas, said: “We hope this exercise actually results in simplification of tax provisions and is completed in a time-bound manner. Otherwise, it could be a repeat of the proposed Direct Taxes Code, 2010 (with subsequent alterations), which never fructified and significant time was invested in deliberating upon it.”
The limit of rebate from I-T under Section 87A continues to be Rs 25,000. “In effect, the maximum rebate under the new regime will get restricted to Rs 20,000 as the rebate is not available if the taxable income exceeds Rs 7 lakh under the new regime,” said Mumbai-based chartered accountant Suresh Surana.
The increase in slabs, coupled with the higher standard deduction limit, will be beneficial to some taxpayers. But do your own calculations and see which regime suits you—old or new.