Budget 2024: FM Sitharaman Revises Tax Slabs, Salaried Employees to Save ₹17,500.
In her seventh Budget speech on 23 July 2024, Finance Minister Nirmala Sitharaman announced significant revisions to the personal income tax slabs under the new tax regime, while keeping the taxation rates unchanged. These adjustments are poised to benefit taxpayers, particularly salaried employees, who stand to save up to ₹17,500 in income taxes.
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Understanding the Revised Tax Slabs
The revised income tax slabs under the new regime are as follows:
Income RangeTax RateUp to ₹3 lakh Nil
₹3 lakh to ₹7 lakh 5%
₹7 lakh to ₹10 lakh 10%
₹10 lakh to ₹12 lakh 15%
₹12 lakh to ₹15 lakh 20%
Above ₹15 lakh 30%
Previously, the 5% tax rate applied to incomes ranging from ₹3 lakh to ₹6 lakh. The extension of this slab to ₹7 lakh means that individuals earning up to ₹7 lakh will now fall under the 5% tax bracket, resulting in potential tax savings.
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Impact on Salaried Employees
One of the notable changes is the increase in the standard deduction for salaried employees from ₹50,000 to ₹75,000. This enhancement allows for a higher reduction in taxable income, leading to increased savings. For instance, a salaried individual earning ₹9 lakh annually would now pay ₹45,000 in taxes, which is 5% of their income, compared to the previous ₹60,000. Similarly, someone with an income of ₹15 lakh would see their tax liability reduced from ₹1,87,500 to ₹1,50,000, translating to a 20% decrease.
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Rationale Behind the Revisions
The government's decision to revise the income tax slabs aims to stimulate spending and address the uneven economic growth observed in recent times. By providing tax relief to the middle class, the government anticipates an increase in disposable income, which could boost consumption across various sectors. This move is also expected to mitigate the impact of inflation on consumers.
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Comparative Perspective
It's noteworthy that while the tax slabs have been revised, the taxation rates remain unchanged. This approach contrasts with previous budgets where changes in tax rates were more common. By adjusting the slabs and maintaining the rates, the government aims to provide relief without significantly impacting its revenue stream.
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Feedback from the Middle Class
Despite the government's intentions, there has been some discontent among the middle class regarding the budget. Critics argue that while the revised slabs offer some relief, other measures in the budget, such as increased taxes on retail investment gains and the removal of certain real estate tax benefits, have offset the benefits. This sentiment of being "backstabbed" has been particularly vocal among middle-class voters, a demographic that constitutes about 30% of the population.
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Finance Minister Nirmala Sitharaman's revisions to the personal income tax slabs in Budget 2024 represent a strategic effort to provide relief to taxpayers and stimulate economic growth. By allowing salaried employees to save up to ₹17,500 in income taxes, the government aims to increase disposable income and boost consumption. However, the mixed reactions from the middle class highlight the complexities involved in fiscal policymaking and the challenges of balancing relief measures with revenue considerations.
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