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A Closer Look at the Significant Tax Adjustments Coming into Force on April 1, 2024

26 Mar A Closer Look at the Significant Tax Adjustments Coming into Force on April 1, 2024

Posted at 07:04h in Direct Tax, News by
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April 1 signifies the start of a fresh fiscal year and holds great importance for personal finances, as many income tax adjustments from the Budget come into effect on this date. Additionally, various other alterations are also implemented, potentially influencing individual financial situations. These modifications were unveiled by Finance Minister Nirmala Sitharaman during her Budget speech this year. Let’s delve into some significant changes you need to know, such as the widened basic exemption thresholds, among others.

New Tax Regime Default Adoption

  • The default choice of the new tax regime is a significant alteration aimed at simplifying tax filing and encouraging more people to opt for the new regime.
  • The new regime offers reduced tax rates but fewer deductions and exemptions.
  • Taxpayers still have the option to continue with the old tax regime if it suits them better.

Elevated Basic Exemption Limit and Rebate

  • Effective from April 1, 2023, the basic exemption limit was raised to ₹ 3 lakh from ₹ 2.5 lakh under the new tax regime.
  • The rebate under Section 87A of the Income Tax Act, 1961, was increased to ₹ 7 lakh from ₹ 5 lakh.
  • Individuals with a taxable income up to ₹ 7 lakh under the new regime will receive a full tax rebate, exempting them from paying any income tax.

New Tax Slabs

  • Income between ₹ 3 lakh and ₹ 6 lakh will be taxed at 5%.
  • Income between ₹ 6 lakh and ₹ 9 lakh will be taxed at 10%.
  • Income between ₹ 9 lakh and ₹ 12 lakh will be taxed at 15%.
  • Income between ₹ 12 lakh and ₹ 15 lakh will attract a 20% tax.
  • Income above ₹ 15 lakh will be taxed at 30%.

Restoration of Basic Deduction

  • The standard deduction of ₹ 50,000, previously applicable only to the old tax regime, has been integrated into the new tax regime.
  • This reduces the taxable income under the new regime.

Reduced Surcharge

  • The highest surcharge rate of 37% on income above ₹ 5 crore has been reduced to 25%.
  • This results in a lower effective tax rate for individuals with high incomes opting for the new regime.

Life Insurance Taxation

  • Maturity proceeds from life insurance policies issued on or after April 1, 2023, where the total premium exceeds ₹ 5 lakh, will be subject to taxation.

Exemption of Enhanced Leave Encashment

  • The tax exemption limit for leave encashment for non-government employees, which was ₹ 3 lakh since 2022, has been increased to ₹ 25 lakh.

Source: https://www.ndtv.com/india-news/new-tax-rules-to-come-into-effect-from-april-1-all-you-need-to-know-5283150

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