New TDS Rules for Salaried Individuals as per Budget 2024

The Union Budget 2024 introduced several significant changes in the tax deduction at source (TDS) on salary, specifically under the new tax regime. While the old regime remains unchanged, the new regime has undergone various amendments aimed at providing relief to taxpayers. Below are the key changes and their implications.

New Tax Slab Rates for FY 2024-25 :

New Tax Regime

The new tax regime has revised the slab rates for the financial year 2024-25. The updated slabs are as follows:

Increase in Standard Deduction

The standard deduction has been increased from ₹50,000 to ₹75,000 under the new regime.

Increase In Exemption of Family Pension:

The deduction u/s 57 increased from 15000 to 25000 under New Tax Regime

Employer’s Contribution to Pension Fund

The limit for the employer’s contribution to the pension fund under Section 80CCD(2), which is allowed as a deduction under both the old and new regimes, has been increased from 10% to 14% of the salary.

TDS Deduction Based on TCS Collection : Change in section 192

A new provision has been introduced where if TCS (Tax Collected at Source) is collected from an employee on any transaction and the employee declares this to the employer, the employer must consider this TCS for TDS deduction on salary. Previously, only TDS deducted was considered by the employer.

Old Tax Regime

For Individuals Below 60 Years

• Up to ₹2.5 lakh: Nil
• ₹2,50,001 to ₹5 lakh: 5%
• ₹5,00,001 to ₹10 lakh: 20%
• Above ₹10 lakh: 30%

For Senior Citizens (60 to 80 Years)

• Up to ₹3 lakh: Nil
• ₹3,00,001 to ₹5 lakh: 5%
• ₹5,00,001 to ₹10 lakh: 20%
• Above ₹10 lakh: 30%

For Super Senior Citizens (Above 80 Years)

• Up to ₹5 lakh: Nil
• ₹5,00,001 to ₹10 lakh: 20%
• Above ₹10 lakh: 30%

Rebate u/s 87A:

This is available only to Resident individual, not to non resident individual or any other person.

Rebate is allowed:

Under Old Tax Regime: only if total income is not exceeding Rs.500000, Rebate shall be allowed upto Rs.12500

Under New Tax Regime: only if total income is not exceeding Rs.700000, Rebate shall be allowed upto Rs.25000

Note:

• Rebate shall not be allowed from LTCG u/s 112A
• Not Allowed to HUF
• Not allowed to NR
• Allowed for LTCG/STCG u/s 111A, Casual Income ex. Lottery – under Old Regime Only

Examples to Illustrate the Changes

Example 1: Standard Deduction and New Slab Rates

Scenario:

• Annual salary: ₹12,00,000
• Applicable under the new regime

Calculation:

1. Gross Salary: ₹12,00,000
2. Standard Deduction: ₹75,000
3. Taxable Income: ₹12,00,000 – ₹75,000 = ₹11,25,000

Tax Computation:

• Up to ₹3,00,000: Nil
• ₹3,00,001 to ₹7,00,000: 5% of ₹4,00,000 = ₹20,000
• ₹7,00,001 to ₹10,00,000: 10% of ₹3,00,000 = ₹30,000
• ₹10,00,001 to ₹11,25,000: 15% of ₹1,25,000 = ₹18,750

Total Tax Payable:

• ₹20,000 + ₹30,000 + ₹18,750 = ₹68,750

So TDS to be deducted in whole year based on this in equal amount.

Example 2: TDS Deduction Considering TCS

Scenario:

• Annual salary: ₹10,00,000
• TCS collected: ₹5,000
• Employee declares TCS to the employer

Calculation:

1. Gross Salary: ₹10,00,000
2. Standard Deduction: ₹75,000
3. Taxable Income: ₹10,00,000 – ₹75,000 = ₹9,25,000

Tax Computation:

• Up to ₹3,00,000: Nil
• ₹3,00,001 to ₹7,00,000: 5% of ₹4,00,000 = ₹20,000
• ₹7,00,001 to ₹9,25,000: 10% of ₹2,25,000 = ₹22,500

Total Tax Payable:

• ₹20,000 + ₹22,500 = ₹42,500

TDS Deduction Adjustment:

• TCS Declared: ₹5,000
• Adjusted TDS Deduction: ₹42,500 – ₹5,000 = ₹37,500

So TDS to be deducted in whole year based on this in equal amount.

The Budget 2024 has introduced several changes aimed at providing relief to taxpayers under the new tax regime. The increase in standard deduction, revised tax slab rates, higher deduction limits for employer contributions to pension funds, and adjustments for TCS collection are significant steps towards simplifying tax compliance and providing financial benefits to salaried individuals. Taxpayers should ensure their employers are informed about TCS collections to benefit from accurate TDS deductions on salary.

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