Widely read:
The 2024 Union budget, which marks the Narendra Modi-led government's first of its third term and finance minister Nirmala Sitharaman's record-equalling seventh, was eventful for taxpayers and investors. For taxpayers, the revised new tax regime is set to energise middle-income earners. For investors? Not so much.
Let's start with income tax.
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Income tax slabs in the new tax regime will be revised as such:
-
Standard deduction
available to salaried individuals and pensioners under the new tax regime will be increased from Rs 50,000 to Rs 75,000.
- These two changes will help those in the highest tax bracket to save Rs 17,500 in taxes.
| New tax regime (existing) | Tax rate | New tax regime (revised) | Tax rate |
|---|---|---|---|
| Up to Rs 3 lakh | 0% | Up to Rs 3 lakh | 0% |
| Rs 3-6 lakh | 5% | Rs 3-7 lakh | 5% |
| Rs 6-9 lakh | 10% | Rs 7-10 lakh | 10% |
| Rs 9-12 lakh | 15% | Rs 10-12 lakh | 15% |
| Rs 12-15 lakh | 20% | Rs 12-15 lakh | 20% |
| Above Rs 15 lakh | 30% | Above Rs 15 lakh | 30% |
Investment gains
Investors, especially the short-termers, should look away now.
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Not only will
short-term capital gains
on equity-oriented investments be taxed at 20 per cent, up from 15 per cent, starting July 23, 2024, the Futures and Options brigade has been dealt a blow, too. The
STT
(short for securities transaction tax) on Option sales will rise to 0.1 per cent from 0.0625 per cent, while the tax on Futures sales will increase to 0.02 per cent from 0.01 per cent.
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The
long-term capital gains tax
on equity-oriented investments will also be spiked from 10 per cent to 12.5 per cent from July 23, 2024.
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The
LTCG exemption limit
is a saving grace. The basic exemption limit for LTCG on equity-oriented investments has been raised from Rs 1 lakh to Rs 1.25 lakh per year. Meaning, let's assume you invested in a listed financial asset for over a year and made a gain of less than Rs 1.25 lakh, you'd be excused from paying any kind of tax. In the case of unlisted financial assets, you'd have to hold the investment for at least two years.
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Additionally, there will be
no indexation benefits
for capital gains made from all assets starting July 23, 2024. This will negatively impact the tax efficiency of long-term investments.
- Lastly, the income earned from share buybacks will be taxed at the investor's end as a dividend from October 1, 2024.The cost of such shares will be treated as capital loss.
Pension and retirement-related changes
Some of the new announcements under this umbrella are as follows:
-
The
New Pension Scheme (NPS)-Vatsalya
for minors is set to allow parents and guardians to contribute until the minor turns 18, after which it seamlessly converts into a normal NPS account.
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The employer's tax-free New Pension Scheme (NPS) contribution will be increased from 10 to 14 per cent of the employee's salary, aiding in higher retirement savings.
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Pensioners also received some relief. Under the new tax regime, the deduction on family pensions is set to increase from Rs 15,000 to Rs 25,000.
- The government will reimburse employers up to Rs 3,000 per month for two years towards their EPFO (provident fund) contribution for hiring each additional employee.
Other benefits
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Are you a first-time worker looking to join the formal sector? Rejoice. If things go to plan, you'll receive a
direct benefit transfer of up to Rs 15,000
in three batches, provided the salary is less than Rs 1 lakh per month.
-
Education loans up to Rs 10 lakh
will be available for students studying in India, with e-vouchers covering 3 per cent of annual interest.
- Tax returns can be reopened for five years , down from ten, if unreported income exceeds Rs 50 lakh.
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