A Comprehensive Guide to Interim Budget 2024
The Hon’ble Finance Minister Shrimati Nirmala Sitharaman presented the budget speech in parliament on 1st Feb 2024. As this is an interim budget, there are no major changes in taxation. While the major updates may hold off until after the 2024 general elections, the upcoming union budget presents an opportunity to address lingering concerns and set the stage for future economic growth.
Key Highlights of the Interim Union Budget 2024
1. No Changes in Tax Rates of Direct Tax
One of the standout features of the interim budget is the decision to maintain the status quo in income tax rates. Both direct and indirect tax rates remain untouched, offering individuals a familiar framework for financial planning and continuity in tax policies.
2. Withdrawal of Outstanding Direct Tax Demands
As a measure to ease the burden on taxpayers, the budget introduces the withdrawal of outstanding direct tax demands for specific periods:
Up to ₹25,000 (FY 2009-10 and earlier): Outstanding direct tax demands up to ₹25,000 for the financial year 2009-10 and earlier will be withdrawn. This aims to address longstanding tax issues.
Up to ₹10,000 (FY 2010-11 to 2014-15): For the fiscal years from 2010-11 to 2014-15, outstanding direct tax demands up to ₹10,000 will be withdrawn, providing targeted relief for smaller outstanding amounts.
To further clarify the tax benefits under different regimes, we have prepared a comparative analysis.
New Tax Regime: Deductions and Exemptions
Here is a comparison between the deductions and exemptions available under the new and old tax regimes:
| Particulars | Old Tax Regime | New Tax Regime (until 31st March 2023) | New Tax Regime (From 1st April 2023) |
|---|---|---|---|
| Income level for rebate eligibility | ₹5 lakhs | ₹5 lakhs | ₹7 lakhs |
| Standard Deduction | ₹50,000 | – | ₹50,000 |
| Effective Tax-Free Salary Income | ₹5.5 lakhs | ₹5 lakhs | ₹7.5 lakhs |
| Rebate u/s 87A | ₹12,500 | ₹12,500 | ₹25,000 |
| HRA Exemption | ✓ | X | X |
| Leave Travel Allowance (LTA) | ✓ | X | X |
| Employer’s contribution to NPS | ✓ | ✓ | ✓ |
| Medical Insurance Premium (80D) | ✓ | X | X |
| Interest on Home Loan (80E) | ✓ | X | X |
| Donation to Political Party (80G) | ✓ | X | X |
| Savings Bank Interest (80TTA/80TTB) | ✓ | X | X |
| Surcharge Rate Reduced | X | X | ✓ |
Key Changes Introduced in Budget 2023 (Remains Unchanged for FY 2024-25)
Higher Tax Rebate Limit & Marginal Relief:
Rebate u/s 87A: Available for Resident Individuals having Total Income up to ₹7,00,000/-.
100% of tax payable or ₹25,000/- (whichever is lower).
Marginal relief applies if total income exceeds ₹7,00,000 but does not exceed ₹7,27,770.
Income Tax Slab Rates for FY 2023-24 / AY 2024-25 (Old Regime)
| Slabs | Individuals (<60 Years) | Senior Citizens (60-79 years) | Super Senior Citizens (80+ years) |
| Up to ₹2,50,000 | Nil | Nil | Nil |
| ₹2,50,001 – ₹3,00,000 | 5% | Nil | Nil |
| ₹3,00,001 – ₹5,00,000 | 5% | 5% | Nil |
| ₹5,00,001 – ₹10,00,000 | 20% | 20% | 20% |
| Above ₹10,00,000 | 30% | 30% | 30% |
New Regime Income Tax Slab Rates
| Slabs | Income Tax Rates |
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹6,00,000 | 5% (Tax rebate u/s 87A) |
| ₹6,00,001 – ₹9,00,000 | 10% (Tax rebate u/s 87A up to ₹7 lakh) |
| ₹9,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Standard Deduction & Family Pension Deduction
Standard Deduction:
The ₹50,000 deduction is now available under both the old and new tax regimes.
This makes the effective tax-free income ₹7.5 lakhs under the new regime.
Family Pension Deduction:
Deduction available: ₹15,000 or 1/3rd of pension, whichever is lower.
Reduced Surcharge for High-Net-Worth Individuals
Surcharge on income over ₹5 crores reduced from 37% to 25%.
This reduces the effective tax rate from 42.74% to 39%.
Higher Leave Encashment Exemption
The exemption limit for non-government employees has been raised from ₹3 lakhs to ₹25 lakhs.
Default Tax Regime
From FY 2023-24, the new tax regime is set as the default option.
Taxpayers must submit a form to opt for the old regime when filing returns.
Old Tax Regime vs. New Tax Regime: Break-Even Points
| Income Level | Standard Deduction | Net Income | Tax under Both Regimes | Additional Deductions Required (Old Regime) | Which Tax Regime to Choose? |
| ₹7,00,000 | ₹50,000 | ₹6,50,000 | ₹0 | ₹1,50,000 | New Regime |
| ₹8,00,000 | ₹50,000 | ₹7,50,000 | ₹36,400 | ₹1,38,500 | Depends on deductions |
| ₹10,00,000 | ₹50,000 | ₹9,50,000 | ₹54,600 | ₹2,50,000 | Depends on deductions |
| ₹15,00,000 | ₹50,000 | ₹14,50,000 | ₹1,45,600 | ₹3,58,000 | Depends on deductions |
Conclusion
A thorough comparison of both tax regimes is necessary to determine the best fit. If your deductions exceed ₹3,75,000, the old regime may be better; otherwise, the new regime is more beneficial.