In the new federal budget 2024-25, significant changes have been made to the income tax slabs for the salaried class in India. Effective from July 1, 2024, a higher rate of income tax is now applicable for individuals with an annual taxable income exceeding Rs. 600,000. For those earning between Rs. 600,000 and Rs. 1,200,000, the tax rate has doubled to Rs. 2,500 or 5 percent, up from the previous Rs. 1,250. However, individuals with incomes up to Rs. 600,000 remain tax-free to ensure the lower-income segment is not burdened with additional taxes.
Moreover, for the income range of Rs. 1,200,000 to Rs. 2,200,000, the tax rate has been increased to Rs. 30,000 plus 15 percent of the amount exceeding Rs. 1,200,000. This change in tax slabs has sparked mixed reactions among taxpayers, with some expressing dissatisfaction over the increased tax burden on the salaried class.
Amidst these changes, there is widespread speculation about potential tax relief measures in the upcoming Union Budget 2024-25, scheduled to be presented in the latter half of July. Discussions have revolved around rationalising tax slabs under the old income tax regime and raising exemption limits under the new regime to boost consumption and demand without increasing welfare spending. While reports suggest a more populist budget than interim ones, experts remain uncertain about the extent of changes in taxation.
Aditya Khemka, a Fund Manager at InCred Asset Management, believes that the budget might focus on incentivizing the manufacturing sector and increasing social expenditure in rural India to stimulate consumption. However, he does not foresee any radical changes in taxes. At the same time, some economists anticipate tax breaks or incentives in the budget, with the possibility of increasing the basic income tax exemption limit to Rs. 5 lakh and introducing basic tax deductions under the new income tax regime.
While incremental changes in income tax are expected, significant alterations are unlikely. The government aims to maintain policy continuity and fiscal discipline, indicating that while tax relief may be on the horizon, sweeping changes are not anticipated. As the nation awaits the Union Budget 2024-25 presentation in July, the impact of these tax reforms on the salaried class remains a topic of keen interest among taxpayers and experts alike.
