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Income tax changes from April 1, 2024: 7 points to know

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3 min read • Updated: March 31, 2024, 4:00 PM

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Summary

New income tax rules from April 1, 2024: The new tax regime, which has low tax rates but fewer exemptions and deductions, will be the default tax regime. However, taxpayers can still choose the old tax regime if it benefits them.

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These new regulations or reforms were announced by Finance Minister Nirmala Sitharaman during her budget speech in February.

New income tax rules from April 1, 2024: The Union Budget's income tax proposals will come into effect in the new financial year (FY 2024-25) on April 1, 2024. These new regulations or reforms were announced by Finance Minister Nirmala Sitharaman during her budget speech in February.

Income tax changes from April 1, 2024

  • The new tax regime, which has low tax rates but fewer exemptions and deductions, will be the default tax regime. However, taxpayers can still choose the old tax regime if it benefits them.

  • The basic exemption limit has been increased from ₹2.5 lakh to ₹3 lakh. The rebate under the new tax regime has been increased from ₹5 lakh to ₹7 lakh as per Section 87A of the Income Tax Act, 1961.

  • The income tax slabs as per the new tax regime are as follows:

  1. Income from ₹0 to ₹3,00,000: 0% tax rate
  2. Income from ₹3,00,001 to ₹6,00,000: 5%
  3. Income from ₹6,00,001 to ₹9,00,000: 10%
  4. Income from ₹9,00,001 to ₹12,00,000: 15%
  5. Income from ₹12,00,001 to ₹15,00,001: 20%
  6. Income above ₹15,00,000: 30%

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  • Taxpayers with income up to ₹7 lakh (or ₹7.5 lakh for individuals with salary income as they can avail ₹50,000 as a standard deduction) will receive complete rebate, taking their taxable income to zero.

  • The government has reduced the surcharge rate from 37% to 25% for individuals with income exceeding ₹5 crore under the new tax regime.

  • The tax exemption limit for leave encashment has been increased to ₹25 lakh from ₹3 lakh for non-government employees.

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  • Maturity proceeds from life insurance policies with premiums exceeding ₹5 lakh annually will be taxable. This will apply to policies issued on or after April 1, 2023. The income tax rule changes won't apply to Unit Linked Insurance Plans (ULIPs).

Old tax regime

  • The old tax regime offers various exemptions and deductions, including house rent allowance (HRA), leave travel allowance (LTA), and medical expenses, which can decrease taxable income and lower your tax payments.

  • The income tax slabs as per the old new tax regime are as follows:

  1. Income from ₹0 to ₹2,50,000: 0% tax rate
  2. Income from ₹2,50,001 to ₹5,00,000: 5%
  3. Income from ₹5,00,001 to ₹10,00,000: 20%
  4. Income from ₹10,00,001 and above: 30%

  • Under the old tax regime, Section 80C of the Income Tax Act allows for a generous reduction of taxable income up to ₹1.5 lakh.

  • The old regime would benefit when total deductions are more than ₹3.75 lakh on gross total income up to ₹30 lakh.