In the Union Budget 2024, the government has introduced significant tax reforms, making it possible for individuals earning up to ₹7.75 lakh to enjoy tax-free income. This move aims to provide much-needed relief to taxpayers and boost disposable income. Let’s explore the key benefits and how you can maximize your savings.
Zero Tax Liability for Income Up to ₹7.75 Lakh
According to cleartax notable change in Budget 2024 is the introduction of a tax rebate under Section 87A for individuals with taxable income up to ₹7.75 lakh. This means that if your total income falls within this range, you will not have to pay any tax at all, effectively making it tax-free.
Increased Standard Deduction
The standard deduction limit has been increased from ₹50,000 to ₹75,000 for salaried individuals and pensioners under the new tax regime. This deduction is available to all taxpayers, regardless of their income level, further reducing your taxable income.
Expanded Deduction Limits
The budget has also expanded the deduction limits under various sections of the Income Tax Act. Here are a few key changes:
- Section 80C: The deduction limit has been increased from ₹1.5 lakh to ₹2 lakh, allowing you to invest more in tax-saving instruments like PPF, EPF, and tax-saving mutual funds.
- Section 80D: The deduction for medical insurance premiums has been raised from ₹25,000 to ₹50,000, providing additional savings for taxpayers.
- Section 80CCD(1B): The deduction limit for contributions to the National Pension Scheme (NPS) has been increased from ₹50,000 to ₹1 lakh.
Marginal Tax Relief
If your income slightly exceeds ₹7.75 lakh, you can still benefit from marginal tax relief. This provision ensures that your tax liability does not increase disproportionately due to a small increase in income.
Changes in New Tax Regime Slab
| Old slab | Old Rate | New Slab | New slab |
| 0-3 Lakh | 0% | 0-3 Lakh | 0% |
| 3-6 Lakh | 5% | 3-7 Lakh | 5% |
| 6-9 Lakh | 10% | 7-10 Lakh | 10% |
| 9-12 Lakh | 15% | 10-12 lakhs | 15% |
| 12-15 lakhs | 20% | 12-15 lakhs | 20% |
| More than 15 lakhs | 30% | More than 15 lakhs | 30% |
Choosing the Right Tax Regime
It’s important to note that the new tax regime is now the default option. However, you can still opt for the old tax regime if it suits your financial situation better. The old regime offers more deductions and exemptions, which may be beneficial if you have higher expenses or investments.
To determine the best option for you, it’s advisable to calculate your tax liability under both regimes and choose the one that minimizes your tax burden.
Maximizing Your Savings
To make the most of the tax-free income benefits, it’s crucial to plan your finances strategically. Here are a few tips:
- Utilize the increased deduction limits to invest in tax-saving instruments like PPF, EPF, and NPS.
- Review your medical insurance coverage and consider increasing your premiums to claim higher deductions.
- Explore other deductions and exemptions available under the Income Tax Act to further reduce your taxable income.
By taking advantage of these tax-free income benefits and implementing smart financial planning, you can significantly increase your disposable income and achieve your financial goals more effectively.
