Finance Minister Nirmala Sitharaman will present the first Budget 2024 of the Modi 3.0 government on July 23, 2024. Expectations are high that the new income tax regime may bring more changes – possibly raising the basic exemption limit, increasing the standard deduction, or/and further rationalising the income tax slabs and tax rates.
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So what can salaried taxpayers expect from Budget 2024 for the new income tax regime? Times of India Online conducted an exclusive survey of top personal tax experts. Here's what they said:
What should be the ideal tax slabs and rates under the new income tax regime?
Tax experts are divided on the ideal income tax slabs and income tax rates under the new tax regime. However, most agree that the 30% tax slab on income above Rs 15 lakh is still too high and should be applied at least to income above Rs 20 lakh.
Aarti Raote, partner, Deloitte India, says that the government may not consider changing the tax rates up to the 25% slab under the new tax regime. Instead, the government may consider increasing the limit of Rs 15 lakh to Rs 20 lakh for the 30% tax rate under the new tax regime.
“Further, the basic exemption limit of Rs 3 lakh may be raised to Rs 5 lakh. Also, raising the standard deduction from the current Rs 50,000 to Rs 1 lakh will provide further relief and boost compliance,” he told The Times of India.
Chander Talreja, partner at Vialto Partners, told the Times of India, “This year the government may provide relief to middle-income level individuals by making further changes in the slab rates and introducing additional slabs for incomes between Rs 15 lakh and Rs 20 lakh.” Chander has recommended the following income tax slabs and rates for salaried taxpayers under the new income tax regime:
Preeti Sharma, partner, tax and regulatory services, BDO India LLP, says the tax rate of 30% applicable on an income of Rs 15 lakh is a steep hike from 5% applicable on an income level of Rs 3 lakh. “The tax rate applicable on an income of Rs 15 lakh should be reduced to 22-25% and another slab can be introduced to increase the tax rate to a maximum of 30% for income of Rs 25 lakh and above,” Preeti told TOI.
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“This tax cut will lead to some loss in direct tax revenue collection for the government, at the same time people will have more disposable income. This will also lead to more spending in the economy, which will lead to more indirect tax collection for the government,” he said.
However, Surabhi Marwah, tax partner, EY India, believes that the current slabs are fine, but the basic exemption should be increased to Rs 5 lakh. She also advocates reducing income tax rates to provide more disposable income in the hands of taxpayers.
Kuldeep Kumar, partner, Mainstay Tax Advisors, says the number of slabs should be reduced under the new regime. “Currently, there are 7 tax slabs under the new regime. These should be rationalised to a maximum of 3 or 4. The government has complete data of income groups and the respective number of taxpayers falling under them and the taxes paid. The changes should be made in such a way that the tax burden on low and middle-income group taxpayers is reduced,” he told TOI.
New Income Tax Regime: What are the current income tax slabs?
Budget 2023 introduced significant changes in personal tax for individuals opting for the new personal tax regime such as reducing the surcharge rate from 37% to 25% for individuals with taxable income above Rs 5 crore, increasing the basic exemption limit to Rs 50,000, providing 100% tax exemption on income up to Rs 7 lakh. Accordingly, the government provided benefits for individuals at the lower income level as well as higher income level.
Currently, the income tax rates and slabs for the new income tax regime are as follows:
The eligibility limit for the exemption is Rs 7 lakh, which means a tax exemption of up to Rs 25,000. There is a marginal relief for individuals whose net taxable income exceeds Rs 7 lakh and the incremental income tax liability exceeds the incremental income by more than Rs 7 lakh.
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Surcharge is levied on income tax if the total income exceeds Rs 50 lakh. The rates of surcharge are as follows: