Income Tax Expectations Budget 2024: What are the ideal new tax regime slabs, rates for middle class

Income Tax Expectations Budget 2024: The Narendra Modi government has been pushing for the adoption of the new income tax regime that offers concessional income tax rates, but with negligible exemptions. The new income tax regime was first introduced in 2020 and in the 2023 Budget further tweaks were made to popularise it amongst the common man and middle class salaried taxpayers.

Further, the new income tax regime was made the default regime, signalling the government's intent to push for it as the main tax regime.

Finance Minister Nirmala Sitharaman will present the first Budget 2024 of the Modi 3.0 government on July 23, 2024. Expectations are high that more changes may be brought in the new income tax regime - possibly raising the basic exemption limit, hiking standard deduction, or/and rationalising the income tax slabs and tax rates further.
So what can salaried taxpayers expect from Budget 2024 for the new income tax regime? Times of India Online did an exclusive survey of top personal tax experts. Here’s what they had to say:

What Should Be The Ideal Tax Slabs, Rates Under New Income Tax Regime?

Tax experts are divided on the ideal tax income tax slabs and income tax rates under the new tax regime. However, most agree that the 30% tax slab above an income of Rs 15 lakh is still steep and needs to be implemented at incomes of at least above Rs 20 lakh.

Aarti Raote, Partner, Deloitte India says that the government may not look at rejigging the tax rates up to 25% slab under the new tax regime. Rather, the government may look to increase the threshold of Rs 15 lakh to Rs 20 lakh for the 30% tax rate under the new tax regime.

“In addition, the basic exemption limit of Rs 3 lakh can be moved to Rs 5 lakh. Additionally, increasing the standard deduction to Rs 1 lakh from existing levels of Rs 50,000 would provide further relief and encourage compliance,” she tells TOI.

Chander Talreja, Partner, Vialto Partners tells TOI, “This year, the government may provide relief to middle income level individuals by tweaking the slab rates further and introducing additional slabs for income ranging between Rs 15 lakh and Rs 20 lakh.” Chander recommends the following income tax slabs and rates for salaried taxpayers under the new income tax regime:

Income range (Rs)		Tax rate
Up to	3,00,000	NIL
3,00,001	6,00,000	5%
6,00,001	9,00,000	10%
9,00,001	12,00,000	15%
12,00,001	15,00,000	20%
15,00,001	20,00,000	25%
20,00,001	above	30%

Preeti Sharma, Partner, Tax & Regulatory Services, BDO India LLP says that the applicable tax rate of 30% on the income of Rs 15 lakh is a very steep increase from 5% at the income level of Rs 3 lakh. “The applicable tax rate on income of Rs 15 lakh should be reduced to 22-25% and another slab may be introduced raising the tax rate to maximum 30% for income level of Rs 25 lakh and above,” Preeti tells TOI.

“This reduction in tax will leave the government with some loss in the collection of direct tax revenue, at the same time leaving the individuals with more disposable income in their hands. This would also lead to more spending in the economy which will bring more indirect tax collection for the government,” she adds.

Surabhi Marwah, Tax Partner, EY India is of the view that the basic exemption should be raised to Rs 5 lakh. She also advocates reducing the income tax rates in order to provide more disposable income in the hands of taxpayers.

Kuldip Kumar, Partner at Mainstay Tax Advisors says that the number of slabs should be brought down under the new regime. "Currently, there are 7 tax slabs under the new regime. These need to be rationalized to 3 or 4 at the most. The government has all the data on income brackets and the respective number of taxpayers falling therein and taxes paid. Changes should be made in such a way that tax burden reduces on the lower and middle income group tax payers,” he tells TOI.

New Income Tax Regime: What Are the Current Income Tax Slabs?
There were significant changes introduced in personal tax for individuals opting for new personal tax regime in the Budget 2023 like surcharge rate was brought down from 37% to 25% for individuals having taxable income more than Rs 5 crores, raising of the basic exemption limit by Rs 50,000, 100% tax rebate on income up to Rs 7 lakh. Accordingly, the government provided benefits for low-income level as well as high income level individuals.

Currently, the income tax rates and slabs for the new income tax regime are:

Income range (in INR)	Rates
Up to 300,000	Nil
300,001 to 600,000	5%
600,001 to 900,000	10%
900,001 to 1200,000	15%
1,200,001 to 1,500,000	20%
Above 1,500,000	30%

The eligibility limit for rebate is Rs 7 lakh, which means a tax rebate of up to Rs 25,000. There is a marginal relief for individuals whose net taxable income exceeds Rs 7 lakh and the incremental income tax liability is higher than incremental income above Rs 7 lakh.

A surcharge is levied on the income tax if total income exceeds Rs 50 lakh. The rates of surcharge are:

Income (in INR)	Surcharge Rates under regular/ old tax regime	Surcharge Rates under New Tax Regime
Above 5,000,000 but less than 10,000,000	10%	10%
Above 10,000,000 but less than 20,000,000	15%	15%
Above 20,000,000 but less than 50,000,000	25%	25%
Above 50,000,000	37%	25%

Source:- Times of India