The Indian Budget 2024 has brought about several changes in the income tax structure, aiming to simplify the process and provide relief to taxpayers. In this article, we will discuss the key highlights of the income tax changes introduced in the budget.
1. Revision of Income Tax Slabs
One of the significant changes in the Indian Budget 2024 is the revision of income tax slabs. The new slabs are designed to reduce the tax burden on the middle class and provide more disposable income in their hands.
The revised income tax slabs are as follows:
- Up to INR 2.5 lakh: No tax
- INR 2.5 lakh – INR 5 lakh: 5%
- INR 5 lakh – INR 10 lakh: 10%
- INR 10 lakh – INR 20 lakh: 15%
- Above INR 20 lakh: 20%
This revision is expected to benefit a significant number of taxpayers by reducing their tax liability and promoting higher disposable income.
2. Removal of Dividend Distribution Tax (DDT)
The Indian Budget 2024 has also abolished the Dividend Distribution Tax (DDT), which was previously levied on companies distributing dividends to their shareholders. This move aims to promote investment and attract more foreign investors to the Indian market.
With the removal of DDT, dividends will now be taxed in the hands of the shareholders as per their applicable income tax slab rates. This change is expected to simplify the taxation process and provide more transparency in dividend income.
3. Introduction of New Tax Regime
Another significant change introduced in the Indian Budget 2024 is the introduction of a new tax regime. Taxpayers now have the option to choose between the existing tax regime and the new tax regime.
The new tax regime offers lower tax rates but eliminates certain deductions and exemptions available under the existing regime. Taxpayers can choose the regime that suits them best based on their individual financial situation.
4. Increase in Standard Deduction
The budget has also increased the standard deduction for salaried individuals. The standard deduction, which was previously INR 50,000, has been raised to INR 75,000. This increase will provide additional tax benefits to salaried individuals and reduce their taxable income.
5. Focus on Digital Payments
The Indian Budget 2024 has emphasized the promotion of digital payments and the reduction of cash transactions. To encourage digital payments, the government has proposed to reduce the tax burden on businesses that have a high proportion of digital transactions.
This move aims to boost the digital economy, improve transparency, and reduce the circulation of black money in the system.
Conclusion
The income tax changes introduced in the Indian Budget 2024 aim to simplify the tax structure and provide relief to taxpayers. The revision of income tax slabs, removal of Dividend Distribution Tax, introduction of a new tax regime, increase in standard deduction, and focus on digital payments are some of the key highlights of the budget.
These changes are expected to benefit taxpayers, promote investment, and accelerate the growth of the Indian economy. It is important for taxpayers to understand these changes and evaluate their financial situation to make informed decisions regarding their tax planning.
What is Income Tax and How does it work?
Income tax is a direct tax levied by a government, which is levied on the amount earned by the citizens of the country. This tax provides essential funds to the government to run its operations. How income tax works, its main features are given below:
Income Calculation:
First of all, the amount earned by the person or businessman is calculated. This income can come from various sources such as salary, business profits, rental income, capital gains, and returns from other investments.
Taxable Income Determination:
Taxable income has to be determined for income tax. It may include certain exemptions and deductions, which a person can subtract from his gross income.
Tax Slabs:
Income tax is levied at different rates for different income slabs. Every country has its own tax slabs. People with higher income are charged higher tax rates.
Filing of Income Tax Return:
An individual or businessman has to file his income tax return, which details his total income and the applicable taxes. This return has been given to the government.
Payment of Tax:
After filing income tax return, if one has to pay tax then he has to pay by the specified due date. If a person also pays advance tax, that too is adjusted.
Compliance and Scrutiny:
The Government scrutinizes the income tax returns filed and can send notices if any discrepancy is found. For compliance the individual is required to provide his/her financial documents and proofs.
Penalties and Consequences:
If a person does not follow the rules and regulations of income tax or provides wrong information, then penalties can be imposed on him. Sometimes legal action can also be taken.