With only five days remaining until the Income Tax Return (ITR) filing deadline, many taxpayers are struggling to understand how the latest changes in tax slabs under the New Tax Regime will impact their tax liabilities this year.
In Budget 2024, Finance Minister Nirmala Sitharaman introduced updated tax slabs under the New Tax Regime, along with modified rates for capital gains tax, an increased standard deduction, and changes to the securities transaction tax (STT) rate. These updates have caused significant confusion among taxpayers as they prepare to file their returns before the July 31 deadline.
Calculating Your Tax Liability
It is important to note that although these new tax rates take effect from July 23, 2024, the taxes will be calculated in the tax return filed in July 2025. This means that these changes will be critical in determining your tax liability when you submit your income proofs next July.
The new capital gains tax rates, which were implemented on July 23, 2024, mean that any gains from asset sales from this date onward will be taxed according to the rates specified in Budget 2024.
Applicable Tax Slabs for July 31, 2024
For those filing their income tax returns this month for the fiscal year 2023-24 (FY24), the older tax slabs under the New Tax Regime will still apply. Here are the tax slabs:
Income up to Rs 3 lakh: Nil
Rs 3 lakh to Rs 6 lakh: 5%
Rs 6 lakh to Rs 9 lakh: 10%
Rs 9 lakh to Rs 12 lakh: 15%
Rs 12 lakh to Rs 15 lakh: 20%
Above Rs 15 lakh: 30%
Choosing Between the Old and New Tax Regimes
Currently, taxpayers can choose between two tax regimes. The old tax regime offers a variety of deductions and exemptions, while the new tax regime provides a lower tax rate but fewer deductions and exemptions, with the exception of the standard deduction.
The main appeal of the new regime is its reduced tax rate compared to the old regime, which still offers a range of deductions and exemptions. In the Union Budget 2023, the threshold for the new regime was increased from Rs 5 lakh to Rs 7 lakh, along with a higher basic exemption limit and adjustments to the tax slabs and rates.
While the new regime simplifies the process with fewer compliance requirements, the old regime remains beneficial for those claiming multiple deductions, especially for expenses like home loan interest under Section 24(b) or house rent allowance (HRA).
Comparison of Tax Slabs: Old vs. New Regime
Income Tax Slab (in Rs) Old Tax Regime New Tax Regime0 - 2.50 lakh 0% 0%
As the deadline approaches, taxpayers must carefully evaluate their options and understand how the recent changes will affect their tax liabilities. Making informed decisions now will ensure a smoother filing process and better financial planning for the upcoming year.