By Chander Talreja
Budget 2024 Income Tax Expectations: The government’s focus has been on simplifying the tax structure and reducing tax complexities so that one does not have to pay more tax. With this objective, one initiative was to introduce an alternative individual tax regime called the New Individual Tax Regime in Budget 2020. This arrangement offered significantly lower tax rates for individuals who chose to forgo certain deductions and exemptions. About 70 deductions and exemptions were removed out of a total of over 100 under the Income Tax Act, 1961 (“Act”) and the remaining were also targeted to be reviewed and rationalized. The new personal tax system offered lower tax rates at six income levels compared to the four-tier structure under the old system.
Initially, the new personal tax regime received mixed reactions as tax benefits associated with some of the most common deductions and exemptions were excluded such as deduction under Section 80C in respect of LIC premium, PPF deposits, etc., for medical insurance premiums. Section 80D, Section 80G for donations, standard deduction etc. and exemption under Section 10(13A) for HRA, Section 10(5) for Leave Travel Allowance (LTA), Section 10(32) for income of minor etc. ) Etcetera. However, certain tax benefits for employer’s contribution to the National Pension System (NPS) under section 80CCD(2), specific allowances under section 10(14), etc. will continue to be allowed.
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There was a lot of ambiguity on how to choose the right regime which is more beneficial because even though the new personal tax regime continued to offer concessional tax rates on the one hand, it took away the tax benefits of various investments/expenditures. This requires careful assessment and consideration by taxpayers depending on individual circumstances, such as if you have the option to claim deductions and exemptions for various investments and expenses made, you may find the old arrangement better. To make it easier and help, the government came up with an online tax comparison calculator in which individuals can assess their situation and make an informed choice.
Budget 2023 introduced significant changes to personal tax, but only for individuals opting for the new personal tax regime, namely:

These changes brought a smile on the faces of taxpayers and encouraged them to adopt the new personal tax regime. The changes in maximum effective tax rates at different income levels are explained below:

This year’s Budget, to be announced on February 1, will be interim, but taxpayers may get more relief through reforms in the new personal tax regime. Given the fact that standard deduction was allowed for the salaried class last year under the new personal tax regime and employer’s contribution to NPS is already allowed, the government will not be able to contribute to an individual’s own contribution to NPS under section 80CCD (1B). may consider including additional deduction of contribution of Rs. Act (limit of Rs 50,000) also under the new personal tax regime.
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NPS is one of the retirement saving methods that is widely used by both salaried and non-salaried individuals. Extending the said deduction under the new personal tax regime will also benefit non-salaried individuals and make the new personal tax regime more attractive and will also give a boost to NPS. Keeping the above in mind, you can conduct a detailed analysis of your individual tax situation to determine which arrangement is beneficial. In fact, if you haven’t done so yet, you still have the option to opt for the new individual tax regime when filing your tax return by July 31.
(Chander Talreja is a partner at Vialto Partners. Manvi Gupta, director, Vialto Partners, contributed to the article. Views are personal)