Budget 2024: On February 1, 2024, Union Finance Minister Nirmala Sitharaman will read out the interim Budget for FY2024-25. The whole budget will be released once the next administration takes office, as Lok Sabha elections are scheduled for early next year. The details of this budget will be considered valid only until the results of the Lok Sabha elections in 2024 are declared and a new government takes office.
Earlier this month, FM Sitharaman stated at the CII Global Economic Policy Forum 2023 Summit that the Union Budget 2024, which is due to be delivered on February 1st, is unlikely to make any "spectacular announcements."
"I don't want to be a downer, but the 1st February Budget is simply a Vote on Account; a budget to cover expenses until the next government takes office." There will be no dramatic announcements. "You'll have to wait until after the election," Sitharaman remarked.
FM Sitharaman delivered a pragmatic, populist-in-parts, and growth-oriented Budget on February 1, 2023. Sitharaman stated at the presentation of the Union Budget for Fiscal Year 2023-24 that the suggestions addressing personal income tax will largely help the country's "hardworking middle class."
Let's take a brief look at the major tax announcements announced by FM Sitharaman in Budget 2023:
1. Budget 2023: New tax brackets are introduced
The new personal income tax structure reduced the number of income slabs from six to five. The tax-free threshold has been raised to Rs 3 lakh. The new relevant tax rates are zero for individuals earning up to Rs 3 lakh, 5% for those earning 3-6 lakh, 10% for those earning 6-9 lakh, 15% for those earning 9-12 lakh, 20% for those earning 12-15 lakh, and 30% for those earning 15 lakh or more.
"Currently, those earning up to Rs 5 lakh do not pay any income tax under either the old or new tax regimes." In the new tax regime, I suggest raising the rebate maximum to Rs 7 lakh. Thus, under the new tax regime, individuals earning up to Rs 7 lakh will not be required to pay any tax," Sitharaman stated on February 1 while presenting Budget 2023.
The following tables show the updated income tax slabs and rates for fiscal years 23-24:
-
Income Tax Slab Income Tax Rate
-
Rs 0-300,000 Nil
-
Rs 300,000-600,000 5 per cent
-
Rs 600,000-900,000 10 per cent
-
Rs 900,000-1,200,000 15 per cent
-
Rs 1,200,000-1,500,000 20 per cent
-
Rs 1,500,000 and above 30 per cent
2. New tax regime - the default tax regime in Budget 2023
According to Finance Minister Sitharaman, the new tax regime is the default tax regime. She also stated that the administration will take more steps to make the voluntary tax regime more appealing. The new tax structure went into effect in 2020, with six income tax bands beginning at Rs 2.5 lakh. Budget 2023 proposes reducing the number of tax brackets to five and raising the tax exemption ceiling to Rs 3 lakh.
3. Revisions to the standard deduction
Budget 2023 introduced a standard deduction of Rs 50,000 under the New Tax Regime, which will be effective in fiscal year 2023-24. Budget 2023 also included a deduction on family pension income under Section 57(iia).
Section 80CCH(2) added a deduction for amounts paid or deposited in the Agniveer Corpus Fund. "Each salaried person with an income of Rs 15.5 lakh or more will thus stand to benefit by Rs 52,500," FM Sitharaman said in her speech.
4. Budget 2023: The maximum tax, including a surcharge, will be 39%.
FM Sitharaman stated that the highest surcharge rate, which was 37% at the moment, will be reduced to 25%. She stated that the proposed modification will reduce the maximum tax rate to 39%.
"Our country's highest tax rate is 42.74 percent." This is one of the highest levels in the planet. In the new tax regime, I suggest lowering the maximum surcharge rate from 37% to 25%. "As a result, the maximum tax rate would be reduced to 39%," FM explained.
5. Budget 2023: Encashment of leave
During the Budget 2023, the government suggested raising the Rs 3 lakh limit for tax exemption on leave encashment on retirement of non-government salaried employees to Rs 25 lakh. The Rs 3 lakh cap was last set in 2002, under the Atal Bihari Vajapayee administration, when the highest basic pay in the government was Rs 30,000 per month.
"The limit of Rs.3 lakh for tax exemption on leave encashment on retirement of non-government salaried employees was last fixed in the year 2002, when the highest basic pay in the government was Rs 30,000/- pm," Sitharaman said in her Budget speech. In accordance with the rise in government salary, I propose raising this cap to Rs 25 lakh."
Employees in the private sector must report their leave encashment after retirement or resignation as "Income from Salary." Employees may obtain an exemption under Income-tax Act Section 10 (10AA)(ii).
