Salaried individuals should brace themselves for significant changes in tax rates as outlined in the Budget 2024-25. The new tax rates for various salary income slabs, set to be effective from July 1, 2024, pending legislative approval, are designed to address economic challenges and augment government revenue.
Here is a comprehensive breakdown of the new tax structure and its implications for taxpayers:
For salary incomes up to Rs 600,000, the tax exemption remains unchanged, providing relief to lower-income earners.
For those earning Rs 1,200,000 annually, the tax obligation has doubled. Previously, individuals in this bracket paid Rs 15,000 (1.25% effective tax rate). Under the new rates, they will pay Rs 30,000 (2.50% effective tax rate), reflecting a 1.25% increase in the effective tax rate.
Taxpayers with an annual salary income of Rs 2,200,000 will experience a rise in tax from Rs 140,000 to Rs 180,000. This increase shifts the effective tax rate from 6.36% to 8.18%, marking an additional Rs 40,000 in taxes and a 1.82% hike in the effective rate.
Individuals earning Rs 2,400,000 salary income will see their tax burden rise from Rs 165,000 to Rs 230,000, with the effective tax rate escalating from 6.88% to 9.58%. This represents an increase of Rs 65,000 and an additional 2.71% in the effective tax rate.
For those with a salary income of Rs 3,200,000, the tax liability increases from Rs 345,000 (10.78% effective tax rate) to Rs 430,000 (13.44% effective tax rate), marking an Rs 85,000 increase and a 2.66% rise in the effective tax rate.
Taxpayers earning Rs 3,600,000 will see their tax obligations rise from Rs 435,000 to Rs 550,000, with the effective tax rate increasing from 12.08% to 15.28%, an increase of Rs 115,000 and 3.19%.
For those with an annual salary income of Rs 4,100,000, the tax rises from Rs 572,500 to Rs 700,000. The effective tax rate jumps from 13.96% to 17.07%, adding Rs 127,500 in taxes and a 3.11% increase.
For incomes of Rs 6,000,000, the tax liability increases from Rs 1,095,000 (18.25% effective tax rate) to Rs 1,365,000 (22.75% effective tax rate), reflecting an additional Rs 270,000 and a 4.50% rise.
Those earning Rs 8,000,000 will face a tax increase from Rs 1,795,000 to Rs 2,065,000, with the effective tax rate rising from 22.44% to 25.81%, resulting in an additional Rs 270,000 and a 3.38% increase.
For incomes of Rs 10,000,000, the tax rises from Rs 2,495,000 (24.95% effective tax rate) to Rs 2,765,000 (27.65% effective tax rate), an increase of Rs 270,000 and a 2.70% rise.
Taxpayers with Rs 12,000,000 will see their tax obligations rise from Rs 3,195,000 to Rs 3,465,000, with the effective tax rate increasing from 26.63% to 28.88%, adding Rs 270,000 and a 2.25% increase.
Finally, for those earning salary income Rs 15,000,000, the tax increases from Rs 4,245,000 (28.30% effective tax rate) to Rs 4,515,000 (30.10% effective tax rate), reflecting an additional Rs 270,000 and a 1.80% rise.
The revised tax structure underscores the government’s strategy to bolster revenue by increasing the tax burden on higher income brackets. These changes will significantly impact taxpayers, necessitating strategic financial planning to navigate the heightened tax landscape.
Note: These projections are based on feedback from tax experts. For detailed information, please refer to the Finance Bill, 2024.
