No Income Tax Payable till Rs 12 Lakh Income, to Introduce New Income Tax Bill: FM Sitharaman

Finance Minister Nirmala Sitharaman has announced plans to introduce a "new income tax bill," following up on her commitment made in the previous budget. FM Sitharaman also extends the income tax threshold from Rs 7 lakh to 12 lakh.

"The middle class provide strengths to the economy. In recognition of their contribution, we have periodically reduced the tax burdens. I am now happy to announce that there will be no income tax up to an income of Rs 12 lakhs, "said Finance Minister Nirmala Sitharaman.

She provided a major tax relief, raising the no-tax income limit to Rs 12 lakh under the new regime, with salaried taxpayers benefiting from a Rs 12.75 lakh exemption due to the standard deduction.

Slabs and rates have been revised across the board, significantly reducing the tax burden for the middle class. For instance, a taxpayer earning Rs 12 lakh will save Rs 80,000 in taxes, while those earning Rs 18 lakh and Rs 25 lakh will save Rs 70,000 and Rs 1.1 lakh, respectively, FM Sitharaman noted.

New Income Tax Bill Next Week

FM Sitharaman also said that a new income tax bill will be brought to the parliament next week during the ongoing budget session, which concludes on February 13.

In budget 2024, FM Sitharaman announced a comprehensive review of the Income Tax Act, 1961, within six months. The government has received more than 6,500 suggestions from stakeholders, and 22 specialised committees are reviewing various aspects of the Act.

The new bill, FM Sitharaman said aims to simplify the tax code with clearer and more direct language, reducing its length by nearly half. It also promises to enhance tax certainty and minimise litigation by making the law easier to understand.

"Over the past 10 years, our government has implemented several reforms for convenience of tax payers, such as faceless assessment, tax payers charter, faster returns, almost 99% returns being on self-assessment, and Vivad se Vishwas scheme. Continuing these efforts, I reaffirm the commitment of the tax department to “trust first, scrutinise later," said FM Sitharaman.

TDS and TCS Rationalisation

To simplify tax compliance, TDS and TCS rules are being streamlined. The TDS exemption limit on senior citizens' interest income has been doubled to Rs 1 lakh, while the TDS threshold on rental income has been raised from Rs 2.4 lakh to Rs 6 lakh.

The TCS threshold for foreign remittances under the RBI’s LRS has also been increased from Rs 7 lakh to Rs 10 lakh.

Additionally, the government will now allow taxpayers to claim the annual value of two self-occupied properties as nil without conditions. These measures are expected to forgo Rs 1 lakh crore in direct tax revenue and Rs 2,600 crore in indirect taxes, the Finance Minister said.