Finance Minister Nirmala Sitharaman introduced the new tax regime with five tax slabs.

What Happened: Sitharaman presented the Narendra Modi-led government's last full budget before the 2024 Lok Sabha elections on Wednesday. The budget had several updates for the country's taxpayers. 

The first announcement the finance minister made as she started with the personal tax part of the budget was about the income tax rebate.

"Currently, those with income up to ₹5 lakh do not pay any income tax in both old and new tax regimes," Sitharaman said. She then announced increasing that limit to ₹7 lakh in the new tax regime. 

With these changes, the minister added that a person making ₹9 lakhs a year, would now be paying ₹45,000 in taxes, a 25% decrease in what they pay in the current system. People making ₹15 lakh would get a similar benefit, as they would see a 20% decrease in their tax liablity.

The standard deduction of ₹50,000 for salaried persons from the old regime was also included in this new tax regime. 

For entities earning over ₹5 crore a 37% surcharge on income tax was imposed, this has now been slashed to 25%. 

Commenting on the changes, ICICI Direct said that the increase in tax exemption limit would mean more disposable income in the hands of Indian taxpayers — thus an increase in spending is expected in various sectors.

Sitharaman also announced that the new tax regime will be the default tax regime but people will still have the option of choosing the old tax regime.

Talking about how much these changes would cost the government, the finance minister said, that it would cost the government around ₹35,000 crore in revenue to implement the changes. 

The changes in the personal tax regimes will take effect from the next financial year.