How Budget Impacts Your Take-Home Salary: A Guide For Salaried Employees
Another year, and we have been bestowed with a new budget. One might ask certain questions about the serving nature of the budget, but overall, it is important to know what this budget has to say to a salaried individual. The Indian Union Budget 2024, presented by Finance Minister Nirmala Sitharaman on July 22, 2024, introduced several new schemes aimed at the employment sector and changes in the existing tax slabs, TDS, and other deductions that will impact every employee.
This guide on budget 2024 for corporate employees will help you understand how your take-home salary is impacted, helping you choose, plan, and save on tax-related activities.
What is the new tax slab in 2024?
India follows a progressive tax system. Income tax is applied to individuals (whether salaried or self-employed) based on the bracket - called income tax slab - where their income falls. The higher the income, the higher the income tax.
The budget 2024 has revised the income tax slabs for employees, providing them an option between new and old tax regimes. The new regime can save an employee an extra ₹17,500 in taxes.
Tax Slab for FY 2023-24 | Tax Rate | Tax Slab for FY 2024-25 | Tax Rate |
|---|---|---|---|
Upto ₹ 3 lakhs | Nil | Upto ₹ 3 lakhs | Nil |
₹ 3 lakhs - ₹ 6 lakhs | 5% | ₹ 3 lakhs - ₹ 7 lakhs | 5% |
₹ 6 lakhs - ₹ 9 lakhs | 10% | ₹ 7 lakhs - ₹ 10 lakhs | 10% |
₹ 9 lakhs - ₹ 12 lakhs | 15% | ₹ 10 lakhs - ₹ 12 lakhs | 15% |
₹ 12 lakhs - ₹ 15 lakhs | 20% | ₹ 12 lakhs - ₹ 15 lakhs | 20% |
More than 15 lakhs | 30% | More than 15 lakhs | 30% |
Changes in TDS rates
In addition to the tax slab, what majorly impacts a salaried employee in India is TDS (Tax Deducted at Source). To be clear, while tax slabs determine how your overall income is taxed annually, TDS ensures tax collection at the point of income generation, such as insurance, rent, lottery, etc. The budget 2024 has revised the TDS to a lower value in most cases, but it will come into effect gradually over the next year.
TDS Sections | Old TDS Rate | New TDS Rate | Effective from |
|---|---|---|---|
Section 194D - Payment of insurance commission in case of other than company | 5% | 2% | 1st April 2025 |
Section 194DA - Payment in respect of life insurance policy | 5% | 2% | 1st Oct 2024 |
Section 194G -Commission on sale of lottery tickets | 5% | 2% | 1st Oct 2024 |
Section 194H - Payment of commission or brokerage | 5% | 2% | 1st Oct 2024 |
Section 194-IB - Payment of Rent by certain individuals or HUF | 5% | 2% | 1st Oct 2024 |
Section 194M - Payment of certain sums by certain individuals or HUFs | 5% | 2% | 1st Oct 2024 |
Section 194-O - Payment of certain sum by e-commerce operator to e-commerce participants | 1% | 0.10% | 1st Oct 2024 |
Section 194F - Payment on account of repurchase of units by mutual funds or UTI | Proposed to be Omitted | 1st Oct 2024 | |
The standard deduction for salaried employees
The standard deduction is a fixed deduction available to salaried individuals for calculating income under head salaries. In the budget 2024, eligible salaried employees' benefit of the standard deduction has been raised to ₹75,000 (from ₹50,000 in the budget 2023) under the new tax regime.
Tax breakdown for a salaried employee - Example
Let’s assume a salaried person with an income of ₹20 lakhs. Under the new tax slab, his taxes are calculated as: no tax on the first ₹3 lakhs, 5% on ₹4 lakhs, 10% on ₹3 lakhs, 15% on ₹2 lakhs, 20% on ₹3 lakhs, and 30% on ₹5 lakhs, totaling ₹2.9 lakhs.
In addition, he gets a relied of ₹75,000 as a standard deduction, so his tax is reduced to ₹2,67,500. Now, adding a 4% cess (tax on tax) brings his total tax to ₹2,78,200.
However, he can reduce his taxes further by investing or spending on financial instruments or loans that the government supports.
If you are looking to make the most of your salary by investing in the right financial tool that helps you manage your finances, offers discounts, and can be accessed anywhere – explore Kotak811 Digital Bank.
FAQs
1. How much income is tax-free in the 2024 budget?
Income up to₹3 lakhs is tax-free under the new tax regime of the Union Budget 2024.
2. Which tax regime is better, old or new for salaried employees?
There is no right answer for it, as it would depend upon the person’s income, preferences, and investments. You are advised to analyze old and new tax regimes before committing to one.
3. Can a salaried person change to the new tax regime?
Yes, a salaried person can change his/her tax regime to the new one or later switch to the old one while filing their income tax.
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