5 NEW INCOME TAX RULES THAT WILL IMPACT YOU IN 2024

Income Tax Reforms: Throughout 2023, several significant changes were introduced in income tax regulations, demanding attention from every taxpayer. Even the slightest mistake can potentially result in considerable financial setbacks. Finance Minister Nirmala Sitharaman’s announcements during the last Union Budget brought about substantial alterations affecting income tax-related regulations in India. It’s crucial to explore and understand these modifications, as they can significantly influence your investment strategies and tax planning.

1. TAX SLAB OF NEW TAX REGIME

 The government has not made any changes in the tax slabs for the old tax regime but has announced new slabs and rates for the new tax regime, which are applicable from April 1, 2023. These slabs and rates are as follows:  

• Annual income 0-3 lakh rupees: Nothing

• Annual income Rs 3-6 lakh: 5%

• Annual income Rs 6-9 lakh: 10%

• Annual income Rs 9-12 lakh: 15%

• Annual income Rs 12-15 lakh: 20%

2. NEW TAX REGIME BECOMES DEFAULT

The new tax regime has been made the default regime. That is, while filing an ITR, it will by default show the new tax regime. That is, if you want to remain in the old income tax regime, then you will have to select it, otherwise, the new tax regime will automatically apply to you by default.

3. TAX REBATE LIMIT

The Modi government has raised the tax rebate limit under Section 87A from Rs 25,000 to Rs 7 lakh in the new tax regime effective from April 1, 2023. This implies that individuals earning an annual income of up to Rs 7 lakh will be exempt from paying income tax if they opt for the new tax regime. Previously, only those earning up to Rs 5 lakh annually were eligible for a tax rebate of Rs 12,500.

4. STANDARD DEDUCTION OF ₹50,000:

 Till last year, employees and pensioners paying income tax used to get tax deductions of ₹50,000 only under the old tax system. From this year, employees and pensioners who choose the new tax regime will also get a standard deduction of ₹50,000.

5. LEAVE ENCASHMENT LIMIT

The tax exemption limit on leave encashment for non-government employees has significantly increased from Rs 3 lakh, maintained since 2002, to Rs 25 lakh in the current year.

These amendments set forth in the income tax regulations of 2023 warrant thorough consideration for taxpayers, as they navigate their financial strategies in the evolving tax landscape. Understanding these changes becomes pivotal in optimizing tax planning and investment decisions.