Income Tax Updates in Budget 2024

There is no change in the new Income Tax regime for individuals in the financial year 2024-25, starting 1st April 2024. The taxpayers continue to have the option of choosing the tax regime of their choice at the time of filing their ITR.

“Although, the new tax regime is the default tax regime, taxpayers can choose the tax regime that they think is beneficial to them. The option for opting out from the new tax regime is available till filing of return for the assessment year (AY) 2024-25,” the ministry said.

New Tax Regime: What is it?

The new tax regime was announced as the default tax regime by Union Finance Minister Nirmala Sitharaman in Union Budget 2023-24.

Under this, the basic exemption limit was hiked to ₹ 3 lakh from ₹ 2.5 lakh, while the rebate under Section 87A of the Income Tax Act, 1961, was increased from ₹ 5 lakh to ₹ 7 lakh.

As a result, individuals who have income up to ₹ 7 lakh per year will get a full tax rebate under the new tax regime, absolving them from paying any income tax. 

How to opt for it?

For individuals other than companies and firms, the new tax regime is the default regime from the financial year 2023-24 and the assessment year corresponding to this is AY 2024-25.

The new tax regime automatically applies unless an individual takes specific action to opt for the old regime.

Difference between old and new tax regime

The Old Tax regime provides several tax deductions and exemptions for individuals, including house rent allowance (HRA), leave travel allowance (LTA) and other deductions under Sections 80C, 80D, 80CCD(1b) and 80CCD(2).

However, these exemptions and deductions are not available in the new one.

While the new tax regime has lower tax rates but fewer deductions and exemptions, the older one had higher tax rates but provided various deductions under different sections of the Income Tax Act.

The older one provide several basic income exemption limits depending on the taxpayer’s age.

For individuals under 60 years, the basic income exemption limit is ₹ 2.5 lakh, while it is ₹ 3 lakh for people who are aged 60 years and above, but under 80. The basic exemption limit for senior citizens — aged 80 years and above — is ₹ 5 lakh.