Budget 2024: Income Tax slabs revised, standard deduction increased to Rs 75,000 under new Tax Regime

In a comprehensive and forward-looking Union Budget for 2024-25, Finance Minister Nirmala Sitharaman unveiled a financial roadmap aimed at fostering economic growth, enhancing social welfare, and simplifying the tax regime. With a substantial allocation of Rs 1.48 lakh crore dedicated to education, employment, and skilling, the budget underscores the Government’s commitment to nurturing human capital and preparing the workforce for future challenges.

One of the standout features of the budget is the sweeping changes to the income tax regime, particularly benefiting salaried individuals and pensioners. The Finance Minister announced an increase in the standard deduction under the new tax regime from Rs 50,000 to Rs 75,000. This adjustment is expected to positively impact four crore salaried individuals and pensioners, enabling them to save an additional Rs 17,500 annually in income tax.

However, the standard deduction under the old tax regime remains unchanged at Rs 50,000. For family pensioners, the deduction has been increased from Rs 15,000 to Rs 25,000 under the new regime. These reforms are designed to make the new tax regime more attractive and easier to navigate for taxpayers.

Revamped Income Tax Slabs

In a bid to further alleviate the tax burden on middle-class taxpayers, the Finance Minister introduced revised income tax slabs under the new regime. The updated slabs are as follows:

1. Income up to Rs 3 lakh: 0 per cent
2. Rs 3 lakh to Rs 7 lakh: 5 per cent
3. Rs 7 lakh to Rs 10 lakh: 10 per cent
4. Rs 10 lakh to Rs 12 lakh: 15 per cent
5. Rs 12 lakh to Rs 15 lakh: 20 per cent
6. Income above Rs 15 lakh: 30 per cent

Previously, the slabs were structured differently, with a more significant tax burden on middle-income earners. The new structure simplifies the tax process and offers substantial relief across various income brackets.

Comprehensive Review of the Income Tax Act

The Finance Minister announced that the Finance Ministry will undertake a comprehensive review of the Income Tax Act to simplify it and reduce the scope for disputes and litigation. This review is expected to be completed within six months, aiming to create a more taxpayer-friendly environment.

Introduction of Vivaad to Vishwas Scheme 3.0

To further ease tax compliance and resolve outstanding disputes, Sitharaman introduced the Vivaad to Vishwas scheme 3.0 for 2024. This initiative is expected to streamline the resolution process for tax-related conflicts, promoting a more harmonious tax environment.

Recognizing the importance of retirement savings, the Finance Minister increased the deduction on employers’ contributions to the National Pension System (NPS) from 10 per cent to 14 per cent of employees’ basic salary. This enhancement applies to both public and private sector companies under the new tax regime, providing a significant boost to employees’ retirement savings.

Detailed Revenue and Expenditure Analysis

The budget provides a granular view of Government revenues and expenditures, highlighting the diverse sources of income and key spending areas. Key revenue contributors include:

1. Income tax: 19 per cent
2. Borrowings and liabilities: 27 per cent
3. GST and other taxes: 18 per cent
4. Corporation taxes: 17 per cent
5. Non-tax receipts: 9 per cent
6. Customs: 4 per cent
7. Excise duty: 5 per cent
8. Non-debt capital receipts: 1 per cent

On the expenditure side, the budget outlines significant allocations to various public sectors, ensuring balanced growth and development. Key expenditure areas include:

1. Interest payments: 19 per cent
2. Central sector schemes: 16 per cent
3. States’ tax devolution: 21 per cent
4. Subsidies: 6 per cent
5. Defence: 8 per cent
6. Finance Commission and other transfers: 9 per cent
7. Centrally sponsored schemes: 8 per cent
8. Pensions: 4 per cent
9. Other expenses: 9 per cent

Major Sectoral Allocations

The budget allocates substantial funds to critical sectors, reflecting the Government’s strategic priorities:

1. Defence: Rs 4,54,773 crore, emphasising national security.
2. Rural Development: Rs 2,65,808 crore, focusing on boosting rural economies
3. Agriculture: Rs 1,51,851 crore, supporting the backbone of the Indian economy
4. Home Affairs: Rs 1,50,983 crore, underscoring internal security
5. Education: Rs 1,25,638 crore, investing in future growth
6. IT and Telecom: Rs 1,16,342 crore, pivotal for digital transformation
7. Health: Rs 89,287 crore, improving healthcare infrastructure
8. Energy: Rs 68,769 crore, focusing on sustainable energy
9. Social Welfare: Rs 56,501 crore, enhancing social safety nets
10. Commerce and Industry: Rs 47,559 crore, promoting industrial growth

Boost to Key Schemes

Several major schemes see significant increases in their allocations, underscoring the government’s commitment to social and economic development:

1. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA): Allocation increased from Rs 60,000 crore in FY23-24 to Rs 86,000 crore in FY24-25, enhancing rural employment.
2. Nuclear Power Projects: Allocation increased from Rs 442 crore to Rs 2,228 crore, promoting clean energy.
3. Semiconductor Development: Allocation increased from Rs 3,000 crore to Rs 6,900 crore, supporting technological advancement.
4. Direct Benefit Transfer for LPG: Allocation increased from Rs 180 crore to Rs 1,500 crore, supporting energy access.
5. Solar Power: Allocation doubled from Rs 4,970 crore to Rs 10,000 crore, reflecting commitment to renewable energy.

The Union Budget 2024-25, with its detailed allocations and revenue plans, underscores the Government’s strategy to foster economic resilience, technological advancement, and sustainable growth. The focus on simplifying the tax regime and providing relief to taxpayers is expected to boost the economy and enhance taxpayer compliance.