Old vs proposed income tax slabs under new regime. What has changed?

Union finance minister Nirmala Sitharaman on Tuesday proposed a new tax structure under the new regime. This new structure, if implemented, promises to offer relief to middle-income earners.

Presenting the Union budget for FY 2024-25, 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.

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

Proposed Tax Structure:

• Income up to ₹3,00,000: Nil
• ₹3,00,001 - ₹7,00,000: 5% of the amount exceeding ₹3,00,000
• ₹7,00,001 - ₹10,00,000: ₹20,000 + 10% of the amount exceeding ₹7,00,000
• ₹10,00,001 - ₹12,00,000: ₹50,000 + 15% of the amount exceeding ₹10,00,000
• ₹12,00,001 - ₹15,00,000: ₹80,000 + 20% of the amount exceeding ₹12,00,000
• Above ₹15,00,000: ₹1,40,000 + 30% of the amount exceeding ₹15,00,000

Current Tax Structure:

• Income up to ₹3,00,000: Nil
• ₹3,00,001 - ₹6,00,000: 5% of the amount exceeding ₹3,00,000
• ₹6,00,001 - ₹9,00,000: ₹15,000 + 10% of the amount exceeding ₹6,00,000
• ₹9,00,001 - ₹12,00,000: ₹45,000 + 15% of the amount exceeding ₹9,00,000
• ₹12,00,001 - ₹15,00,000: ₹90,000 + 20% of the amount exceeding ₹12,00,000
• Above ₹15,00,000: ₹1,50,000 + 30% of the amount exceeding ₹15,00,000

The proposed structure widens the income slabs, particularly the 5% slab extending up to ₹7 lakh, compared to ₹6 lakh in the current structure. This extension offers more significant tax relief to individuals with incomes up to ₹7 lakh. However, a tax rebate up to Rs.25,000 is already applicable under the new regime for resident individuals if the total income does not exceed ₹7,00,000.

For those earning between ₹10,00,001 and ₹15,00,000, the proposed structure results in slightly lower taxes. For example, an individual earning ₹12,00,000 would pay ₹50,000 + 15% of the amount exceeding ₹10,00,000 under the proposed regime i.e ₹80,000, compared to ₹90,000 ( ₹45,000 + 15% of the amount exceeding ₹9,00,000) under the current regime.

There is a minor reduction in the tax for incomes above ₹15,00,000 in the proposed structure ( ₹1,40,000 + 30% of the amount exceeding ₹15,00,000) compared to the current regime ( ₹1,50,000 + 30% of the amount exceeding ₹15,00,000).