Budget 2024-25: Salaried Class to Face Up to 35% Income Tax

June 15, 2024Zayn0

With effect from July 1, 2024, the federal budget for 2024–2025 has made considerable modifications to the income tax slabs for the salaried class. High-level sources claim that the goals of these changes are to reorganize the tax system and bring in more money.

Reduced Tax-Free Baseline

The decrease of the tax-free threshold from the previous Rs. 1,200,000 to Rs. 600,000 is the most significant modification. This is a major change from the previous policy in that anyone with taxable income beyond Rs. 600,000 will now be liable to income tax.

Increased Tax Rates
The new tax slabs reflect a hike in tax rates across various income ranges:

  • Income up to Rs. 600,000: Unchanged at 0% tax rate
  • Income exceeding Rs. 600,000 but not Rs. 1,200,000: Tax rate increased from 5% to 10% of the amount exceeding Rs. 600,000
  • Income exceeding Rs. 1,200,000 but not Rs. 2,200,000: Tax rate increased from Rs. 30,000 + 15% of the amount exceeding Rs. 1,200,000 to Rs. 60,000 + 20% of the amount exceeding Rs. 1,200,000
  • Income exceeding Rs. 2,200,000 but not Rs. 3,200,000: Tax rate increased from Rs. 180,000 + 25% of the amount exceeding Rs. 2,200,000 to Rs. 260,000 + 30% of the amount exceeding Rs. 2,200,000
  • Income exceeding Rs. 3,200,000 but not Rs. 4,100,000: Tax rate increased from Rs. 430,000 + 30% of the amount exceeding Rs. 3,200,000 to Rs. 560,000 + 35% of the amount exceeding Rs. 3,200,000
  • Income exceeding Rs. 4,100,000: Tax rate increased from Rs. 700,000 + 35% of the amount exceeding Rs. 4,100,000 to Rs. 845,000 + 40% of the amount exceeding Rs. 4,100,000

Potential Impacts on General Public

Since the lower tax-free level and higher tax rates will increase the total tax burden on the salaried class, it is likely that the government is trying to raise additional income through these adjustments. The modifications might potentially be a part of a larger initiative to redesign and improve the progressive nature of the tax code.

In Summary

The federal budget for 2024–2025 included updated income tax slabs, which signaled a significant change in the way the government approached taxation. The modifications are intended to increase revenue, but in the years to come, it will be important to closely monitor and assess how they affect the salaried class and the overall state of the economy.

Zayn

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