Budget 2024: Know the real tax on your income
The slab rates under the old income tax regime have remained unchanged since July 2014. Will they be revised in the upcoming budget? It seems unlikely, given that the government has been pushing the new tax regime and has made it the default option.
The tax liability in real terms (after adjusting for inflation) in the old regime is now as high as 55% to 58% on incomes above ₹50 lakh and under ₹1 crore. It’s 21% and 39%, respectively, for those earning ₹10 lakh and ₹20 lakh, data from BankBazaar shows.
The new tax regime offers no respite. Inflation-adjusted figures show real rates are between 11% and 64% for those earning ₹10 lakh to ₹5 crore. «A closer look at the numbers reveals that the positive impact of the new regime is felt only on incomes up to ₹15 lakh. Up to this level, the effective tax rates appear to be lower than inflation-adjusted values from 2013-14. Above ₹15 lakh, there is no inflation adjustment provided by the new regime,» BankBazaar said in a report.
Despite the relative simplicity of the new tax regime – and the fact that it’s now the default option – many people still prefer the old regime as it lets them avail of deductions such as house rent, home-loan payments, insurance premiums, investments in government savings schemes (PPF, EPF, NPS, etc) and tuition fees, among others, thus lowering their tax liability. This makes it imperative that an inflation adjustment is made in the old tax regime.
«Compared to 2012-13 benchmarks, the 20% and 30% slabs must be updated for the old regime. On the basis of the Cost Inflation Index, the values for 2012-13 and 2024-25 are 200 and 363, respectively, implying an 81.5% rise in the index. Persistent inflation in recent years has pumped the index up
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