In the recently unveiled interim Budget 2024, the income tax slabs for the fiscal year 2023-24 in both the old and new tax regimes have remained unchanged. Various categories of individuals, including those below 60 years, senior citizens, and super senior citizens, encounter different tax rates within the old tax regime. The Income Tax Department, earlier this month, released notification for Income Tax Return (ITR) Forms 1-6 for the Assessment Year (AY) 2024-25, setting the submission deadline for ITR on July 31, 2024. Since the new regime automatically becomes the default option starting from FY 2023-24, taxpayers must actively choose the old tax regime if preferred.
Various categories of citizens, including those below 60 years, senior citizens, and super senior citizens, are subject to different tax rates within the old tax regime. Individuals below 60 years enjoy a tax-free threshold of Rs 2,50,000, with a 5% tax rate applied to incomes between Rs 2,50,001 and Rs 5 lakh. Incomes ranging from Rs 5,00,001 to Rs 10 lakh are taxed at a rate of 20%, while incomes exceeding Rs 10 lakh face a 30% tax rate.
Senior citizens aged 60 to 80 benefit from a higher exemption limit of Rs 3 lakh. Incomes between Rs 3 to Rs 5 lakh attract a 5% tax rate, with the remaining tax rates aligning with those applicable to general citizens. Super senior citizens aged 80 and above have a basic exemption limit of Rs 5 lakh. Incomes between Rs 5,00,001 to Rs 10 lakh incur a 20% tax rate, and amounts exceeding this threshold face a 30% tax rate. Similar to the new regime, a 4% cess is applied to the income tax amount, with surcharges for incomes exceeding Rs 50 lakh.
It’s essential to consider available tax-saving deductions under the old tax regime when deciding whether to opt for this system.
In the old tax regime, Section 80C emerges as a pivotal incentive, allowing deductions of up to Rs 1.5 lakh. Taxpayers can invest in instruments such as the National Pension System (NPS), Equity Linked Saving Schemes (ELSS), Unit Linked Insurance Plan (ULIP), and Public Provident Fund (PPF). Additionally, deductions of Rs 1.5 lakh are applicable to life insurance premiums, contributions to the Sukanya Samriddhi Account, National Savings Account (NSC), Senior Citizens Saving Schemes (SCSS), and fixed deposits. Section 80C also covers expenses like tuition fees for two children, registration charges, stamp duty for property, and home loan repayments.
Taxpayers can avail themselves of a Rs 1.5 lakh tax exemption on principal and interest under Sections 80C and 24 subsections. First-time homebuyers can further benefit from a Rs 2.5 lakh rebate on home loan interest. Stamp duty and registration charges can also be deducted under Section 80C.
Saving Bank Interest (80TTA)
Under Section 80TTA, a maximum tax exemption of Rs 10,000 on savings account interest is available, irrespective of age. This applies to deposits in banks, cooperative societies, or post office savings accounts.
Taxpayers can claim up to Rs 25,000 for health insurance covering self, spouse, and dependent children. For insured individuals aged 60 years or more, the deduction limit increases to Rs 50,000. An additional deduction of up to Rs 50,000 for parents aged 60 years is available for their health insurance.
Tax exemption on the interest of children’s education loans is available under Section 80E without any limit. This benefit can be claimed by either parent who is repaying the loan.
Tax savings on HRA are applicable if one resides in a rented apartment. If the annual rent exceeds Rs 1 lakh, the tenant must provide the PAN of the landlord to claim exemption. In privately owned companies, employees in metro cities can have HRA of 50% of the basic salary, while those in non-metro cities can have 40% of the basic salary.
Overall, the old regime proves more advantageous when total deductions surpass Rs 1.5 lakhs, and individuals earn more than Rs 15 lakhs.
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