Budget 2024: Is India’s Income Tax Exemption Limit Set to Increase?

There is growing anticipation among taxpayers as Finance Minister of India, Nirmala Sitharaman, is expected to announce significant changes to the income tax exemption limit in the upcoming Budget 2024 session.

In order to give relief to taxpayers in India, the newly elected Narendra Modi government may consider lowering the income tax rates for certain individuals, including those earning an annual income of Rs 10 lakh.

According to government sources cited by Moneycontrol, the government is reportedly planning to raise the income threshold before levying any tax from Rs 3 lakh to Rs 5 lakh in the upcoming budget session. This adjustment is anticipated to help individuals who file returns under the new tax regime, as per the report.

Tax experts across the country say that the government should hike the basic exemption of the income tax limit to Rs 5 lakh in Budget 2024.

There are several factors that contribute to changes in the income tax limit in India. Some of these factors include prevailing economic conditions in India, political factors, and government priorities.

Besides announcing new slab rates, the finance ministry may consider revising the Section 80C limit.

Amid ongoing discussions, the revision of the Section 80C limit has also gained traction among taxpayers, as it has remained unaltered since 2014 despite inflation soaring by 46 percent since then.

Under Section 80C of the Income Tax Act, 1961, Indian citizens can save their tax liabilities by claiming a maximum deduction of Rs 1.5 lakh.

Incorporating changes in the 80C limit will bring huge relief to taxpayers as it helps them to cope with inflation and increase their investments in various options like PPF, NPS, Senior Citizen Saving Scheme, life insurance premiums, ELSS, and others, paving the way for individual financial growth, savings for retirement and children’s education.

However, Section 80C benefits can’t be availed of by individuals opting for tax benefits under the new tax regime.

The 2024 Budget session is likely to be presented in Parliament by the Finance Minister in the third week of July or July 24, 2024.

There is huge anticipation among taxpayers in India over changes in income tax slab rates, as they expect revisions to be made by the Modi government, which came into power for the third consecutive term in the recently concluded general elections in India. However, there is no official confirmation from the government on potential tax cuts aimed at giving relief to tax paying individuals.

At present, individuals can opt for two tax regimes, i.e., the old tax regime and the new tax regime. From 2023, the new tax regime will be the default option. Individuals interested in opting for the old tax regime need to file Form 10-IEA.

Here are the current tax slabs rates under both the new and old tax regimes

New tax regime

Salaried individuals earning income up to Rs 3 lakh don’t have to pay any tax. People with annual income between Rs 3-6 lakh are liable to pay 5 percent, while it is 10 percent for individuals with an income of Rs 6-9 lakh. Similarly, the tax percentage for people with annual salaries of Rs 9-12 lakh and above Rs 12 - 15 lakh is 15 percent and 20 percent, respectively. The income tax rate for above Rs 15 lakh is 30 percent.

Old tax regime

Under the old tax regime, people falling below the Rs 2.5 lakh bracket were exempt from paying any tax. A 5 percent tax rate is applicable for Rs 2.5-5 lakh income. Likewise, individuals whose income is between Rs 5-10 lakh and above Rs 10 lakh are liable to pay 20 percent and 30 percent tax, respectively.

Note: The slab rate will differ for senior citizens and super senior citizens.

To check the slab rates, visit the official income tax website: incometax.gov.in. Now, navigate to the “Individual/HUF” tab and then select “Salaried Employees” and finally choose “Tax Slabs.”

People paying tax are hopeful that the new tax measures, if implemented, will address their financial concerns and support their economic well being, eventually paving the way for a positive step towards a more prosperous India.

In addition to tweaking tax slab benefits, people are paying close attention to other things like HRA rate adjustments, deductions in home loan interests, increasing the standard deduction from Rs 50,000 to Rs 1 lakh and others.

As anticipation builds for the announcement of the tax exemption limit in the upcoming budget session, people are eagerly awaiting budget updates from Nirmala Sitharaman.