Budget 2024: FM Sitharaman says taxpayers can save up to ₹17,500 under new tax regime. Here’s how

In Budget 2024, Union Finance and Corporate Affairs Minister Nirmala Sitharaman revised income tax slabs under the New Tax Regime, offering considerable savings in the hands of salaried taxpayers.

After the revision of income tax slabs, there is no tax liability for income up to ₹3 lakh. However, as the changes announced in Budget 2024 come into effect, the income bracket up to ₹7 lakh — instead of only till ₹6 lakh earlier — will now attract 5 percent tax rate. Likewise, 10 percent tax liability will be levied on income up to ₹10 lakh instead of only ₹9 lakh earlier.

Tax rates for other income brackets continue to remain the same.

However, another key change that Sitharaman has introduced relates to higher standard deduction, which was raised from ₹50,000 to ₹75,000 from FY 2024-25.

Collectively, these changes can enable a salaried taxpayer (in the 30 percent tax bracket) to save up to ₹17,500 in total tax outgo under the new tax regime.

“As a result of these changes, a salaried employee in the new tax regime stands to save up to ₹17,500 in income tax,” Finance Minister Nirmala Sitharaman said during the Budget speech in Parliament on Tuesday.

Let us understand how this ₹17,500 was calculated

Suppose a taxpayer earns ₹15,00,000 and thereby falls in the 30 percent tax bracket.

I. For ₹3-6 lakh income, tax liability is ₹15,000 as per current rates whereas it is 20,000 as per the latest changes. There is an additional tax of ₹5,000 which is -5,000.

II. For income of ₹9-12 lakh, tax liability is 15 percent as per the current rates, which becomes ₹45,000. As per the new slabs, tax liability for income between ₹10 and 12 lakh is 15 percent, thus bringing the tax amount to ₹30,000. The total saving here is ₹15,000 (45,000 - 30,000).

III. When you factor in both I and II, the total saving is ₹10,000 (15,000 -5,000).

IV. There is an additional standard deduction of ₹25,000 for someone with 30 percent tax bracket, this leads to the total saving of ₹7,500 (30% of 25,000).

When you add III and IV, the total savings become ₹17,500.

So, this is how a taxpayer who earns ₹15,00,000 stands to save ₹17,500 with implementation of new rates under the new tax regime.