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The 2024 Budget is expected to bring major income tax relief by increasing the standard deduction in the new tax regime . This will ease the burden on taxpayers and align with the government’s vision to simplify and streamline the tax system. Let’s see what this means for the common man and how it compares with thedeductions old tax regime .
Key Highlights
- Higher standard deduction under the new tax regime is expected in the upcoming Union Budget 2024.
- Old Regime vs New Regime: Comparison of benefits with old tax regime deductions .
- Who will benefit: Middle-income earners, salaried individuals, and pensioners are expected to benefit the most.
The Expected Hike in Standard Deduction in the New Tax Regime
Here are some of the details of the expected announcement of a standard deduction hike in the upcoming Union Budget 2024.
What is Standard Deduction?
A standard deduction is an amount deducted from the earnings of taxpayers, reducing their taxable income. This deduction makes tax filing simpler as taxpayers don't need to list individual deductions. Also Read: Upcoming Union Budget 2024: Key Highlights
Changes Proposed in Budget 2024
The new tax regime introduced in 2023 was supposed to simplify taxation. The deduction allowed in the new tax regime is ₹50,000 for salaried individuals and pensioners.However, it received mixed reactions from taxpayers as there were fewer deductions compared to the old tax regime deductions . The proposed increase in deduction under the new tax regime is to ease this concern by giving relief upfront.
Advantages of Higher Standard Deduction
Here are the benefits of a higher standard deduction in the new tax regime:
- No Extra Documents Needed: A higher standard deduction in the new tax regime requires no documents to claim it. You will still need documents like bank and income statements when you file your income tax returns .
- More Disposable Income: Lower taxable income means less tax to pay. This means more take-home pay for taxpayers, which in turn, means more money left over for spending.
- Fairness: All taxpayers will benefit, especially those who don’t have large expenses they can claim deductions on. There will be one standard deduction in the new tax regime to rule them all.
Also Read: Budget 2024: What Is a Budget? Why Is It Important?
Who Will Benefit the Most?
Here are the key aspects to understand who will benefit the most from this increase in standard deduction.
Middle-Income Earners
Middle-income earners who don’t have significant investments in tax-saving instruments will benefit the most. They will get relief upfront without having to invest or spend in specific ways.
Salaried Individuals
Salaried individuals can find it difficult to keep track of all the eligible deductions. A higher standard deduction in the new tax regime will simplify their tax filing process.
Retirees and Pensioners
Retirees and pensioners who don’t have large expenses to list in the tax filing process will benefit the most from higher standard deductions in the new tax regime . Also Read: Budget 2024: Top 4 Expectations From Finance Minister Nirmala Sitharaman
Government’s Intent Behind the Change
The government intends to make the tax system simpler. By increasing standard deduction in the new tax regime , they want to:
- Encourage compliance by making the tax filing process less painful.
- Give fair tax relief to all income groups.
- Boost the economy by increasing the disposable income for a larger segment of the population.
Also Read:
FAQS - FREQUENTLY ASKED QUESTIONS
What is the standard deduction in the new tax regime ?
A standard deduction is a fixed amount that can be deducted from a taxpayer’s income to reduce their taxable income. The current deduction is ₹50,000. However, a higher standard deduction will likely be announced in the upcoming Union Budget 2024.
How is the new regime different from the old tax regime deductions?
The new regime has lower tax rates but allows fewer deductions in comparison to the old one.
Who is eligible for standard deduction in the new tax regime?
All taxpaying salaried individuals and pensioners are eligible for standard deduction in the new tax regime.
Who will benefit the most from a higher standard deduction in the new tax regime?
Middle-income earners, salaried individuals and pensioners will benefit the most from a higher standard deduction in the new tax regime.
What are the advantages of a higher standard deduction in the new tax regime?
A higher standard deduction in the new tax regime would simplify the tax filing process by not requiring taxpayers to list individual expenses, increase disposable income and give fair tax relief to all taxpayers.
What are the deductions in the new regime?
The new regime has fewer deductions than the old regime. Higher standard deduction is one of the few deductions available.
Is standard deduction allowed in the new tax regime?
Taxpayers can avail of ₹50,000 standard deduction in the new tax regime.
Is the new tax regime better than the old one?
The answer depends on individual circumstances. The new regime simplifies the process and gives immediate relief while the old regime provides more opportunities for deductions through investments and expenses.
What to consider when choosing between the new and old regimes?
Taxpayers should consider the deductions available under the old regime and compare the total tax liability under both regimes.
Which tax regime is better for 7.5 lakhs?
An individual earning ₹7.5 lakhs in salary would have to pay 20% tax under the old regime, whereas they would have to pay 10% tax under the new one.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
