Budget Relief in New Tax Regime: Direct Benefit Up to ₹17,500, Old Regime Loses Out

Relief has been provided in income tax in the budget. Under the new tax regime, income between 3 lakhs to 7 lakhs will now be taxed at 5%. There have also been changes in its slabs. Additionally, the standard deduction under the new tax regime has been increased from 50,000 rupees to 75,000 rupees. These two changes will benefit taxpayers up to 17,500 rupees. However, no changes have been made in the old tax regime.

Benefit of Up to 17,500 Rupees for Taxpayers

After changes in the income tax slab and standard deduction, taxpayers will benefit up to 17,500 rupees. Earlier, on an income of 15.75 lakhs, the tax was 1 lakh 57 thousand 500 rupees. Now, after this change, the tax will be 1 lakh 40 thousand rupees.

6 tax slabs in the new tax regime

order	New slab	Old slab
1	up to 3 lakhs	up to 3 lakhs
2	3 lakhs to 7 lakhs	3 lakhs to 6 lakhs
3	7 lakhs to 10 lakhs	6 lakhs to 9 lakhs
4	10 lakhs to 12 lakhs	9 lakhs to 12 lakhs
5	12 lakhs to 15 lakhs	12 lakhs to 15 lakhs
6	More than 15 lakhs	More than 15 lakhs

What’s Special in the New Tax Regime?

• There is no discount of any kind.
• You can get zero tax on income up to 7 lakh rupees.
• If you are not investing in any scheme, you should opt for the new tax regime.

What’s Special in the Old Tax Regime?

• You can get tax exemption on investment, health insurance, children’s school fees, and house rent expenses.
• In such a situation, if your money goes into these things, the old tax regime will be suitable for you.
• In the old tax option, you can make income tax-free up to 10 lakh rupees.
• In the old tax option, there is no need to pay income tax on an annual income of up to 5 lakh rupees, including 87A deduction. If your annual income is between 5 lakhs to 10 lakhs, you will have to pay up to 20% tax, meaning you will have to pay 1,12,500 rupees in tax. However, there are many provisions in the income tax law that allow tax exemptions, through which you can make income tax-free up to 10 lakh rupees.

You Can Save Tax on 1.5 Lakhs Through Investment

If you invest in EPF, PPF, Equity-Linked Savings Scheme, Sukanya Samriddhi Yojana, National Savings Certificate, 5-Year FD, National Pension System, and Senior Citizen Savings Scheme, you will get tax exemptions.

Now 5% tax on earnings between 3 lakh to 7 lakh in the new tax regime

order	New slab	Tax
1	up to 3 lakhs	0%
2	3 lakhs to 7 lakhs	5%
3	7 lakhs to 10 lakhs	10%
4	10 lakhs to 12 lakhs	15%
5	12 lakhs to 15 lakhs	20%
6	More than 15 lakhs	30%

Investing Up to 1.5 Lakhs in Any of These Schemes

You will have to invest up to a maximum of 1.5 lakhs in any one or a combination of these schemes. If you have done this, now deduct 1.50 lakh rupees from 10 lakh rupees. Now the income under tax will be 8.50 lakhs. You can save tax up to 1.5 lakhs under section 80C of the income tax.

Save 2 Lakhs in Tax on Home Loan

If you have taken a home loan, you can save up to 2 lakhs in tax on the interest paid on it. Under section 24B of the income tax, you can get tax exemption on interest of 2 lakh rupees in a financial year. Deduct this from your taxable income. That means now the income under tax will be 6.50 lakh rupees.

4 tax slabs in the old tax regime, up to 30%

order	slab	Tax	How much tax has to be paid?
1	up to 2.5 lakhs	0%	0
2	2.5 lakhs to 5 lakhs	5%	₹12,500
3	5 lakhs to 10 lakhs	20%	₹1,12,500 (12,500+1,00,000)
4	More than 10 lakhs	30%	Above ₹1,12,500

Medical Policy Expense is Also Tax-Free

Under section 80D, by taking a medical policy, you can save up to 25,000 rupees in tax. Your name, your wife’s name, and your children’s names should be in this health insurance. Besides this, if your parents are senior citizens, you can buy health insurance in their name and get an additional discount of up to 50,000 rupees. That means now the income under tax will be 5.50 lakh rupees.

Tax Exemption of 50,000 in National Pension System

If you invest separately up to Rs. 50,000 annually in the National Pension System (NPS), you will get an additional exemption of Rs. 50,000 under section 80CCD (1B). That means now the income covered by tax will be reduced to 5 lakh rupees.

Now You Will Get the Benefit of Section 87A on 5 Lakh Rupees

Taking advantage of section 87A of income tax, if you deduct 5 lakh rupees from an income of 10 lakh rupees, your taxable income will be 5 lakh rupees. In such a situation, now you will have to pay zero tax on this 5 lakh rupees.

Income Tax Slabs Changed Only 4 Times in 12 Budgets

In recent years, the tax slab has been changed 6 times. Before March 31, 2010, only annual income up to 1.60 lakh was tax-free, which was increased to 1.80 lakh in the budget presented in 2011. After that, changes were made from time to time. Since the new tax regime was introduced in the 2020-21 budget, no changes have been made to the income tax slabs.

5 Major Changes in Tax and Investment in Budget 2023 and Interim Budget 2024

Tax Exemption Granted for Cases from 1962 to 2015 

Relief was provided in the interim budget presented on February 1, 2024, for pending old tax cases. Tax was waived off for pending income tax cases from 1962 to the financial year 2009-10. However, this benefit was only given to those whose tax liability was up to ₹25,000.
Understand this with an example: Suppose you had to pay an income tax of ₹20,000 in 2005. Under the new rule, you no longer have to pay this tax, meaning your tax will be waived off. Similarly, a decision was made to withdraw pending income tax cases up to ₹10,000 for the years 2010-11 to 2014-15.

Rebate Increased to ₹7 Lakh for New Tax Regime 

In the budget on February 1, 2023, the rebate limit was increased to ₹7 lakh for those opting for the new tax system. Earlier, it was ₹5 lakh. The budget provided additional relief to salaried individuals. A standard deduction of ₹50,000 was also introduced in the new tax system.

Increased Maximum Investment for Senior Citizens and Monthly Income Scheme 

In the 2023 budget, the maximum investment limit in the Senior Citizen Savings Scheme was increased to ₹30 lakh. Previously, the maximum investment in this scheme was ₹15 lakh. This scheme offers an interest rate of 8.2%.
At the same time, the investment limit in the Monthly Income Scheme was increased from ₹4.5 lakh to ₹9 lakh. The joint account limit was also increased from ₹9 lakh to ₹15 lakh. This scheme offers an annual interest rate of 7.4%.

7.5% Interest on Investments Up to ₹2 Lakh in Mahila Samman Yojana 

The ‘Mahila Samman Savings Certificate’ was launched in the budget on February 1, 2023, with an interest rate of 7.5%. Women can deposit a maximum of ₹2 lakh for two years in this scheme. This means an investment of ₹2 lakh will yield a profit of ₹32,000 in two years.

Lower Tax on PF Withdrawals Without PAN 

In the 2023 budget, changes were made to the tax rules related to withdrawals from the Provident Fund (PF). If you withdraw money from the account and the PAN is not linked with the PF account, now 20% TDS will be deducted. Earlier, 30% tax was deducted.