India’s hardworking middle class will not have to pay any tax if their annual income is up to Rs 7.5 lakh, the Union Budget 2024-25 has proposed under the new tax regime prescribed as per Section 115BAC of the Income Tax Act, 1961. Further, Finance Minister Nirmala Sitharaman, while presenting the budget, announced that the government has increased the standard deduction limit from Rs 50,000 to Rs 75,000 under the new tax regime. The increase in the standard deduction is expected to benefit taxpayers who come under the highest tax bracket, that is, with a taxable income of Rs 15 lakh or higher.
Earlier, according to the changes proposed in the Union Budget 2023-24, the basic exemption limit under the new tax regime was hiked to Rs 3 lakh from Rs 2.5 lakh. It has also introduced a provision for standard deduction of Rs 50,000 in new tax regime for salaried and pensioners which was available only under the old tax regime so far.
What is standard tax deduction?
Introduced in the Union Budget 2018, the standard deduction is offered in lieu of transport allowance and medical reimbursement. In interim budget 2019, the standard deduction limit was increased to Rs 50,000 from Rs 40,000 earlier. Individual taxpayers are not required to submit any bills to the employer to claim the standard deduction.
New tax regime is the default option
Taxpayers have the option to stick with the old tax regime, finance minister (FM) Nirmala Sitharaman said while presenting the Budget in the Lok Sabha on February 1, 2023. The new tax regime remains the default option, she added. This means that from April 1, 2023, taxpayers who want to opt for the old tax regime have to separately choose it at the beginning of the financial year.
The Budget 2023-24 has also reduced the number of tax slabs under the new tax regime to 5 from the previous 6.
Budget 2024-25: Tax slab under new tax regime
| Income | New tax regime slab |
| Up to Rs 3 lakh | Nil |
| From Rs 3 lakh to Rs 7 lakh | 5% |
| From Rs 7 lakh to Rs 10 lakh | 10% |
| From Rs 10 lakh to Rs 12 lakh | 15% |
| From Rs 12 lakh to Rs 15 lakh | 20% |
| Above Rs 15 lakh | 30% |
| Source: Budget 2024-25 |
“The revised tax slabs under the new tax regime and the extension of the standard deduction will ensure that the salaries class will have a little more cash in hand this coming year to fuel consumption and or investments in India,” said Pallav Pradyumn Narang, partner, CNK.
Tax calculation under new tax regime
| Particulars | Old regime | New regime |
| Total income | Rs 15 lakh | Rs 15 lakh |
| Standard deduction | Rs 50,000 | Rs 75,000 |
| Taxable income | Rs 14,50,500 | Rs 14,25,000 |
| Tax due | Rs 2,57,400 | Rs 1,30,000 |
Assuming that your yearly income is Rs 15 lakh, here is how your salary will be taxed under the old and new tax regime. The calculation does not factor in any exemptions allowed under the old tax regime.
Proposal for amendments to LTCG tax
The finance minister has announced a major amendment in the finance bill relating to LTCG tax, restoring indexation benefit on the sale of properties bought prior to July 23, 2024. Individuals or HUFs who purchased houses before July 23, 2024, will have the option to choose between the two tax rates of LTCG- 20% with indexation or 12.5% without indexation. This benefit applies to properties held from 2001 to July 23, 2024.
Earlier, the LTCG tax was 20% for the real estate sector. It was reduced to 12.5% but with the removal of indexation benefit during the presentation of Union Budget 2025.
Click to read in detail and who will benefit with this amendment?
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