Salaried employees could save up to Rs 17,500 in income tax annually in new tax regime

In sops for the middle class, Finance Minister Nirmala Sitharaman on Tuesday (July 23) hiked standard deduction by 50 per cent to ₹75,000 and tweaked tax slabs under the new income tax regime to provide more money in the hands of the salaried class with a view to boost consumption.

She said salaried employees in the new tax regime could save up to ₹17,500 in income tax annually following the changes announced in the Budget.

The standard deduction for salaried employees is proposed to be increased from ₹50,000 to ₹75,000 annually. Similarly, 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," Sitharaman said in her Budget speech.

In the last fiscal, more than two-thirds individual taxpayers have availed the new personal income tax regime. Over 8.61 crore I-T returns were filed in 2023-24 fiscal.

New tax slabs effective from April 1, 2024

The new tax slabs under the new income tax regime will be effective from April 1, 2024. (Assessment Year 2025-26).

Sitharaman said income of up to ₹3 lakh will continue to be exempted from income tax under the new regime.

As per the proposal, a 5 per cent tax will be levied on income between ₹3-7 lakh, 10 per cent between ₹7-10 lakh, 15 per cent for ₹10-12 lakh.

However, 20 per cent tax will continue to be levied on income between ₹12-15 lakh and 30 per cent for income above ₹15 lakh.

Under the existing new I-T regime, a 5 per cent tax is levied on income between ₹3-6 lakh, 10 per cent for income between ₹6-9 lakh.

Income between ₹9-12 lakh and ₹12-15 lakh is subject to 15 per cent and 20 per cent tax, respectively. A 30 per cent I-T would be applicable on income above ₹15 lakh.

(With agency inputs)