Income tax exemption limit under New Tax regime to be hiked from Rs 3 lakh to Rs 5 lakh?

New Delhi: Income tax exemption limit is set to be hiked? Whether it is or not is still unknown, but the question is raging on the Internet and we take a close look at what may be in store. Notably, the government may reduce Income tax rates for individuals in the upcoming budget under the New Tax regime.

Currently, an initial income tax rate of 5 per cent is imposed on income of Rs 3 lakh under the new tax regime. However, the Centre wants to increase income tax exemption limit from Rs 3 lakh to Rs 5 lakh. So, no income tax will be imposed on income below Rs 5 lakh. This change will increase the disposable income of individuals in the lower income brackets and likely result in increasing demand and helping boost the economy.

Different Tax Regime

The budget of 2020 introduced a new tax regime with a higher income tax threshold before taxes are imposed compared to the old tax system. However people can claim more deduction and exemptions under the old tax regime. Under the old tax structure, taxpayers can claim deductions for investments under specific sections and enjoy exemptions such as house rent and leave travel allowances.

No relief to high income tax payers

As per a report by Money Control, government is unlikely to entertain proposals from industry representatives to lower the highest tax rate under the new system from 30% to 25%.

An official mentioned that there is currently a need to boost consumption among lower-income groups, hence changes in higher tax brackets are improbable.

Moreover, despite calls to increase the threshold for the highest tax rate of 30% from Rs 10 lakh to Rs 20 lakh under the old tax regime, the government intends to keep rates unchanged to encourage more individuals to opt for the new tax regime, which discourages exemptions and rebates.

Govt eyeing lower tax rate rather than freebies

In the new tax regime, individuals earning over Rs 15 lakh annually fall into the highest 30% tax bracket, whereas under the old regime, this bracket starts for earnings above Rs 10 lakh. Lastly, the government is prioritizing the potential reduction of personal income tax rates over significantly escalating expenditure on subsidies and other programs susceptible to inefficiencies

 Budget 2024: Currently, an initial tax rate of 5 per cent is imposed on income of Rs 3 lakh under the new tax regime. However, the Centre may increase Income tax exemption limit from Rs 3 lakh to Rs 5 lakh.  Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today