Budget 2024: Government aims to improve the appeal of the new tax system

In an effort to draw in taxpayers, the Union Budget 2024 supports the New Tax Regime with larger refunds and deductions. Increased employer NPS payments and standard deductions are among the proposed modifications. As seen by numerous initiatives to make the New Tax Regime more alluring to taxpayers, the Union Budget 2024 supports the governments policy of seeming preference for it over the former one. The government s advocacy for the New Tax Regime was made clear by the increase in the income threshold of ₹5 lakh to ₹7 lakh last year, which qualified a person for a rebate under Section 87A. The tax rebate for individuals who choose the New Tax Regime was also increased, from Rs. 12,500 to Rs. 25,000.

Revised rates and slabs / Present income slabs and rates / Proposed slabs and rates

Under both tax systems, a set standard deduction of ₹50,000/-is provided to salaried and retired individuals against their taxable wages and pensions. If you want to use the New Tax Regime, the finance minister has suggested a greater standard deduction of Rs. 75,000/-from your income from pay or pension. The standard deduction under the Old Tax Regime would stay at Rs. 50,000 for those who choose it. The employers contribution to your NPS account is initially deducted from your income under the current tax system. Then, under both tax systems, the same is deductable under Section 80CCD(2). Employees of the Central Government are eligible to deduct up to 14% of their pay from the employers contribution to their NPS account.

The finance minister has proposed some tweaks in the tax slabs and rates for the New Tax Regime starting in the current financial year. 1) 0 to 3 Lakhs 0 2 3 to 6 lakhs 5% 3 6 to 7Lakhs 10% 4 7 to 9 Lakhs 10% 5 9 to 10 Lakhs 15% 6 10 to 12 Lakhs 15% 7 12 to 15 Lakhs 20% 8 Over 15 lakhs 30% Proposed slabs and rates 1 0 to 3 Lakhs 0 2 3 to 6 lakhs 5% 3 6 to 7Lakhs 5% 4 7 to 9 Lakhs 10% 5 9 to 10 Lakhs 10% 6 10 to 12 Lakhs 15% 7 12 to 15 Lakhs 20% 8 Over 15 lakhs 30% So, it is apparent that the government is trying to lure the salaried class into opting for the new tax regime. The new tax regime becomes very attractive for those under the lower tax slabs who cannot spare money to invest and are eligible for various investment-based deductions. However, considering the benefits and deductions that a salaried person has to forgo when opting for the New Tax Regime—like the House Rent Allowance, Leave Travel Concession, deduction under Section 80C and 80D, and tax benefits for home loans—in most cases, the old tax regime is beneficial, especially for the younger lot who are either staying in rented premises or servicing a home loan.