Revised personal income tax rates: up to ₹3 lakh tax free—What does it mean for you?

Finance Minister Sitharaman announces revised personal income tax slabs in Budget 2024: 5% for ₹3-7 lakh, 10% for ₹7-10 lakh, and 15% for ₹10-12 lakh; no taxes for income up to ₹3 lakh.

Budget 2024: While tabling the Union Budget 2024-25 in Parliament, Union Finance and Corporate Affairs Minister Nirmala Sitharaman announced significant changes in personal income tax rates for the fiscal year 2024-25, aiming to reduce the tax burden on the masses.

The Finance Minister has provided relief to taxpayers by revising the income tax slabs for the current fiscal year. Under the new regime, individuals will continue to pay no tax on incomes up to ₹3 lakh, maintaining the previous year's structure.

Income ranging from ₹3 lakh to ₹7 lakh will now attract a 5% tax rate, which was previously applicable to income between ₹3 lakh and ₹6 lakh.

Income levels between ₹7 lakh and ₹10 lakh will face a 10% tax rate, previously applied to income between ₹6 lakh and ₹9 lakh. For incomes between ₹10 lakh and ₹12 lakh, the tax rate has been set at 15%, whereas the previous range was ₹9 lakh to ₹12 lakh.

Tax rates remain unchanged for incomes between ₹12 lakh and ₹15 lakh at 20%, and for incomes above ₹15 lakh at 30%.

The Finance Minister presented the first Union Budget of the Modi 3.0 government and her record seventh consecutive one during the Monsoon Session of Parliament. The budget session of Parliament began on July 22 and, according to schedule, will end on August 12.

New Personal Income Tax Slabs for FY 2024-25

Income Range Tax Rate

₹0- ₹3 Lakh Nil

₹3- ₹7 Lakh 5%

₹7- ₹10 Lakh 10%

₹10- ₹12 Lakh 15%

₹12- ₹15 Lakhs 20%

Above ₹15 Lakhs 30%

The finance minister added that salaried employees under the new tax regime will save up to ₹17,500 annually in taxes due to the changes proposed in the FY25 Budget.

FM Sitharaman made two announcements regarding the new tax regime:

The standard deduction for salaried employees is proposed to be increased from ₹50,000 to ₹75,000.

The deduction on family pension for pensioners is proposed to be enhanced from ₹15,000 to ₹25,000.

“This will provide relief to about four crore salaried individuals and pensioners,” Nirmala Sitharaman said.

The government raised the deduction limit to 14 percent from 10 percent for employers' contribution to the National Pension System (NPS). This means a non-government employee in the new tax regime will now be allowed a deduction of an amount not exceeding 14 percent of the employee's salary instead of 10 percent earlier.

“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 mobilised. Thus, the total revenue forgone is about ₹7,000 crore annually,” FM Nirmala Sitharaman said.

Presenting the Union Budget for 2024-25, Finance Minister Nirmala Sitharaman also said the government will come out with an SoP (standard operating procedure) for TDS defaults and simplify and rationalise compounding of such offences.

More than two-thirds of individuals availed of the new income tax regime, Sitharaman said in Lok Sabha today.

Additional measures announced to ease the tax burden on individuals and businesses include merging the existing tax exemption regimes for charities, reducing the TDS rate for e-commerce operators to 0.1 percent from the erstwhile 1 percent, and allowing TCS credit against TDS deducted on salaries.