New Income Tax Slabs 2024-25 | New Tax Regime vs Old Tax Regime Calculation | Budget 2024 Analysis

Summary

In this video, we break down the new tax slabs introduced in Budget 2024 and compare them with the existing tax regime to help you determine which one is better suited to your financial situation. With detailed examples, we explain how various income levels, deductions, and tax rebates impact your tax liability under both regimes. We also explore scenarios where the old tax regime may still offer benefits, and provide tips on how to make the most of these changes. The video concludes with guidance on switching between tax regimes based on your income type.

Takeaways

• 😀 The old tax regime remains unchanged for FY 2024-25, with tax slabs ranging from 0% to 30% based on income levels.
• 😀 In the old tax regime, individuals earning up to 5L can benefit from a tax rebate of 12,500, effectively reducing their tax to zero.
• 😀 The new tax regime introduces higher tax-free income limits, with no tax for income up to 7L, compared to 5L in the old regime.
• 😀 Standard deduction is 50,000 in the old regime and 75,000 in the new regime, offering a slightly higher benefit in the latter.
• 😀 NPS contribution limits have been increased to 14% in the new regime, benefiting employees in the private sector and PSUs.
• 😀 Both tax regimes offer zero tax for incomes below 5L (old regime) or 7L (new regime), making them beneficial for lower-income earners.
• 😀 For incomes between 5L and 7L, the new regime may offer better benefits due to its broader tax-free range.
• 😀 The old tax regime is better suited for individuals with substantial deductions (e.g., HRA, 80C), as it allows for more tax planning.
• 😀 The new tax regime is ideal for those with fewer deductions who want a simpler tax structure and immediate tax benefits.
• 😀 Individuals with a taxable income above 10L will need to carefully consider their deductions, as the old regime may offer slight benefits in some cases.

Q & A

What changes were introduced in the tax slabs for Budget 2024?

The new tax slabs introduced in Budget 2024 only apply to the new tax regime. The old tax regime remains unchanged, but the new tax regime introduces tax slabs with no tax from 0 to 3 lakhs, followed by a 5% tax rate from 3 to 7 lakhs, and other incremental tax rates up to 30% for incomes above 15 lakhs.

Is there any benefit to the old tax regime after the Budget 2024 changes?

The old tax regime still benefits individuals who claim high deductions such as HRA, home loan interest, and others. However, for most people, the new tax regime is likely to be more advantageous due to lower tax rates and higher deductions, especially for salaried individuals with simpler tax situations.

What are the key differences between the old and new tax regimes introduced in Budget 2024?

The key differences include a higher standard deduction of 75,000 in the new regime, a tax rebate for income up to 7 lakhs, and changes in NPS contribution limits. The tax slabs in the new regime are also different, with a zero-tax rate for incomes up to 3 lakhs, and progressive rates from 5% to 30% for higher incomes.

How does the new tax regime compare to the old tax regime for an individual with an income below 7 lakhs?

For incomes below 7 lakhs, both regimes are beneficial, as there will be zero tax in the old regime (due to the rebate of 12,500 rupees) and zero tax in the new regime for incomes up to 7 lakhs. In both cases, individuals will not need to pay tax.

What tax benefit does the new regime offer for incomes between 7 to 10 lakhs?

For incomes between 7 to 10 lakhs, the new regime charges a tax of 5% from 3 to 7 lakhs and 10% from 7 to 10 lakhs. If the individual claims fewer deductions, the new regime can be slightly more favorable, but depending on the deductions claimed, the old regime might provide lower tax liability in some cases.

How do deductions affect the choice between the old and new tax regimes?

Deductions play a significant role in determining which tax regime is better. If an individual can claim substantial deductions like HRA, home loan interest, and others, the old regime might be better. However, the new regime offers lower tax slabs and fewer deductions, which can simplify tax planning for those with lower deductions.

Can individuals switch between the old and new tax regimes during the financial year?

Yes, salaried individuals can switch between the old and new tax regimes at any time during the financial year. However, individuals with business income can only switch once. Additionally, the new tax regime is set as the default when filing Income Tax Returns (ITR).

What happens if someone claims a high amount of deductions in the old tax regime?

Claiming a high amount of deductions in the old tax regime, such as 3 lakhs in deductions, can still result in a higher tax liability compared to the new regime. However, in cases where high deductions are applicable (like HRA and home loan interest), the old regime might still provide tax savings.

How does the NPS contribution limit differ between the old and new tax regimes?

In the old tax regime, the NPS contribution limit from the employer is 10%, while in the new regime, this limit has been increased to 14% for private sector employees, including employees of private companies, PSUs, and private sector banks. This increase benefits individuals under the new tax regime.

What can individuals do if they want more in-hand salary without worrying about tax planning?

Individuals who want more in-hand salary without worrying about tax planning can choose the new tax regime, as it offers simplified tax structures and no need for complex investment-driven deductions. This allows them to invest freely in stocks or mutual funds without focusing on tax-saving investments.