Budget Update: How You Can Save Rs. 17,500?

How You Can Save Rs. 17,500?

By Nilesh Waghela 

Mumbai: The Union Finance Minister, Nirmala Sitharaman, has introduced changes in the new tax system which include alterations in the tax slab. 

One significant change is the increase in the standard deduction limit from 50 thousand to 75 thousand rupees. 

These changes are aimed at helping individuals, particularly those on a salary, to save up to Rs. 17,500.

The Finance Minister has also increased the amount of family pension from 15,000 to 25,000.

Income Tax Rates Under the New System:

Up to 3 lakh: 0 percent

3 to 7 lakh: 5 percent

7 to 10 lakh: 10 percent

10-12 lakh: 15 percent

12-15 lakh: 20 percent

More than 15 lakh: 30 percent

How the Savings Work:

How will Rs 17,500 be saved in the new tax system? To address this question, we have consulted with a reputable chartered accountant.

He told that if your salary is 15 lakhs per annum, then you will save Rs 17,500 in the new tax system. This includes the benefit of increase in standard deduction along with tax.

Now see Tax levied on salary of 15 lakhs as per the new tax system.

Suppose your annual income is Rs 15 lakh. Out of this, there will be no tax on up to Rs 3 lakh. 

Then tax will be levied at the rate of 5 percent on 3 to 7 lakh. 3 to 7 lakh i.e. 4 lakh is taxed at the rate of 5 percent, which is 20 thousand. 

After this, from 7 to 10 lakh, the income of 3 lakh is taxed at the rate of 10 percent, which is 30 thousand. 

The remaining income of 10 to 12 lakh i.e. 2 lakh is taxed at the rate of 15 percent, which is 30 thousand rupees. 

After this, the income of 12 to 15 lakh is taxed at the rate of 20 percent, which is 60 thousand rupees. If this is added, the figure is 1 lakh 40 thousand, which is 10,000 less than 2023-24. 

That is, taxpayers will now get a benefit of 10 thousand in the new tax system.  

Change in tax slab

In the financial year 2023-24, the income tax bracket of people who used to fall in the 3 to 6 lakh income has been changed to 3 to 7 lakh. 

In this tax slab, tax is levied at the rate of 5 percent. On the same lines, the Finance Minister has changed the tax slab of 6 to 9 lakh to 7 to 10 lakh. 

There is a provision of tax at the rate of 10 percent in this. At the same time, the tax slab of 9 to 12 lakh has been changed to 10 to 12 lakh. Now tax will be levied at the rate of 15 percent in this.

Similarly, the limit of standard deduction was earlier 50 thousand, it has been increased to 75 thousand. 

In this way, the taxpayer will save an additional Rs 7500. Also, if we add the Ten thousand rupees saved due to the change in tax rate, then the total savings become Rs 17,500.