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India's New Tax Rules Take Effect: What You Need to Know from 1-April-24
Last Updated: 2nd April 2024 - 05:42 pm
With the start of the 2024–2025 fiscal year on April 1, 2024, considerable modifications to India's tax laws have gone into force, affecting people's tax obligations and financial planning. The modifications, which Finance Minister Nirmala Sitharaman stated, are intended to improve taxpayer engagement in the new system and expedite the tax filing process. This is a thorough rundown of the main changes to the tax laws that people should be aware of:
Adoption of the New Tax Regime by Default
A key modification is the automatic implementation of the new tax system, which presents lower tax rates together with fewer exemptions and deductions. Based on their financial situation, taxpayers can now pick between the existing and new tax regimes, ensuring that they select the one that would benefit them the best.
Basic Rebate and Exemption Limit
Taxpayers will benefit as of April 1, 2023, when the basic exemption level under the new tax regime increases to ₹3 lakh from ₹2.5 lakh. Furthermore, the Income Tax Act's Section 87A rebate has been raised from ₹5 lakh to ₹7 lakh, which will help people with taxable income up to ₹7 lakh by fully refunding their taxes.
Updated Tax Slabs
The updated tax slabs have the following structure under the new tax regime:
- Earnings between ₹3 and ₹6 lakh: five percent taxed
- Income taxed at 10% between ₹6 lakh and ₹9 lakh
- Earnings from ₹9 lakh to ₹12 lakh: 15% tax rate
- Income between ₹12 lakh and ₹15 lakh: 20% tax is applied
- Income above ₹15 lakh: Taxed at 30%
Basic Deduction Restored and Surcharge Reduced
Further lowering taxable income is the inclusion of the standard deduction of ₹50,000 in the new tax regime, which was previously exclusive to the old tax regime. Furthermore, under the new system, the highest surcharge rate of 37% on income over ₹5 crore has been lowered to 25%, which means that high-income people will pay less in effective tax.
Taxation on Life Insurance and Leave Encashment
Policies issued after April 1, 2023, with total premiums above Rs 5 lakh, would now have their maturity proceeds subject to taxation. Individuals have also benefited greatly from a huge increase in the tax exemption ceiling for leave encashment for non-government employees, which was raised from ₹3 Lakh to ₹25 Lakh.
To Summarize:
These revisions to the tax laws mark the beginning of a new chapter in Indian personal finance management and tax compliance. For the purpose of maximizing their tax strategies and financial planning in the upcoming fiscal year, taxpayers must remain aware about these developments. People can move more efficiently and clearly across the changing tax landscape by being aware of these changes and adjusting accordingly.
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