In a major move, the finance minister has announced an increase in the income tax rebate limit from Rs 7 lakh to Rs 12 lakh, providing significant savings for high earners. However, for those earning above Rs 12 lakh, taxes will be applicable as per slab rates under the new tax regime, with a 5% tax on income between Rs 4 lakh to 8 lakh, 10% on income between Rs 8 lakh to 12 lakh, and 15% between Rs 12 lakh to 16 lakh. The FM has also proposed a sharp cut in tax rates for incomes between Rs 15 lakh and Rs 24 lakh, with the 30% rate now only applicable for income above Rs 24 lakh.
Income Tax Rebate Limit Increased: Significant Savings for High Earners
In a significant move, India's Finance Minister has announced an increase in the income tax rebate limit from Rs 7 lakh to Rs 12 lakh. This move is set to provide substantial savings for high-income earning households.
Background
The income tax rebate is an amount that is deducted from an individual's total income before calculating the tax liability. In the previous tax regime, the rebate limit was set at Rs 5 lakh. However, in the 2023-24 Union Budget, the Finance Minister increased this limit to Rs 7 lakh. This move was widely welcomed as it reduced the tax burden for many individuals.
Increase to Rs 12 Lakh
The latest increase to Rs 12 lakh is a welcome step that will further reduce the tax burden for high earners. Individuals with an income of up to Rs 12 lakh will now be eligible for the rebate, resulting in significant savings.
Impact on Different Income Slabs
Under the new tax regime, individuals earning above Rs 12 lakh will be subject to taxes as per the slab rates. The slabs and applicable tax rates are as follows:
Sharp Tax Cut for Incomes between Rs 15 Lakh and Rs 24 Lakh
In a separate move, the Finance Minister has also proposed a sharp cut in tax rates for incomes between Rs 15 lakh and Rs 24 lakh. Under the previous regime, the 30% tax rate was applicable for incomes above Rs 15 lakh. However, in the new regime, this rate will only apply for incomes above Rs 24 lakh.
Top 5 FAQs
1. Who is eligible for the increased income tax rebate limit of Rs 12 lakh? Answer: Individuals with an income of up to Rs 12 lakh are eligible.
2. Will the tax liability for individuals earning above Rs 12 lakh increase? Answer: Yes, individuals earning above Rs 12 lakh will be subject to taxes as per the slab rates. However, the sharp cut in tax rates for incomes between Rs 15 lakh and Rs 24 lakh will provide some relief.
3. What are the benefits of the new tax regime? Answer: The new tax regime offers lower tax rates and a simpler tax structure. However, certain deductions and exemptions available under the old regime have been removed.
4. Can I switch between the old and new tax regimes? Answer: Individuals can switch between the two regimes on a year-to-year basis.
5. When will the new income tax rules come into effect? Answer: The new rules will come into effect from April 1, 2024.
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