New Tax Rules To Come Into Effect From April 1: 7 Key Points You Need To Know

With the new financial year, the Union Budget¡¯s Income Tax proposals will also come into effect from Apr 1, 2024. Finance Minister Nirmala Sitharaman announced these changes during her Budget speech earlier this year in February.

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Here's an overview of some significant changes, including expanded basic exemption limits, among others, that you should be aware of.

1. The default adoption of the new tax regime is a significant change aimed at simplifying the tax filing process and encouraging more taxpayers to opt for the new regime, which offers lower tax rates but fewer deductions and exemptions. However, taxpayers still have the option to continue using the old tax regime if it proves to be more advantageous for them.

2. As per the announcement made in the previous Budget, starting from April 1, 2023, the basic exemption limit was raised to Rs 3 lakh from Rs 2.5 lakh under the new tax regime. Additionally, the rebate provided under Section 87A of the Income Tax Act, 1961, was increased to Rs 7 lakh from Rs 5 lakh. Consequently, individuals with a taxable income of up to Rs 7 lakh under the new regime will receive a complete tax rebate, exempting them from paying any income tax.

3. According to the new regime, these are the tax slabs:

• Income from Rs 3 lakh to Rs 6 lakh: 5% tax rate
• Income from Rs 6 lakh to Rs 9 lakh: 10% tax rate
• Income from Rs 9 lakh to Rs 12 lakh: 15% tax rate
• Income from Rs 12 lakh to Rs 15 lakh: 20% tax rate
• Income exceeding Rs 15 lakh: 30% tax rate

4. The standard deduction of Rs 50,000, which was previously only applicable to the old tax regime, has now been extended to also cover the new tax regime. This adjustment will lead to a reduction in taxable income for individuals opting for the new regime.

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5. The surcharge rate, which previously stood at 37% for incomes exceeding Rs 5 crore, has now been decreased to 25%. This adjustment leads to a lower effective tax rate for individuals with substantial incomes who opt for the new regime.

6. According to the statement made by the Finance Minister, maturity proceeds from life insurance policies issued on or after April 1, 2023, with a total premium exceeding Rs 5 lakh, will be liable for taxation.

7. The tax exemption limit for leave encashment for non-government employees, previously Rs 3 lakh, has now been raised to Rs 25 lakh.