Budget 2024 income tax takeaways
: Finance Minister Nirmala Sitharaman on Tuesday presented the first Budget of the Modi 3.0 government. This is the first full budget of the Modi Government post elections. With no major changes being announced in the interim budget, the expectations were high this time around. In line with Government’s focus on simplifying taxes, improving tax-payer services, provide tax certainty and reduce litigation the FM proposed the following changes to the direct-taxes:
From income tax slab changes to a hike in standard deduction and several changes in the capital gains tax regime, here is a look at the key takeaways from the Union Budget 2024 as listed by EY:
Income Tax Slabs 2024-25 Budget 2024 Live Updates
1.
To provide relief to the middle class, FM has rationalized slab rates under the
new tax regime
and allowed additional standard deduction of Rs 25,000 under the new tax regime, effectively making the total standard deduction as Rs 75,000 effective from AY 2025-26. The new tax regime continues to be the default regime of taxation. You can check the latest income tax slabs under the new tax regime here:
2. Effective AY 2025-26, deduction for employer’s contribution to NPS has been enhanced from the existing threshold of 10% to 14% specifically for those opting for the new tax regime.
3. Credit for tax collected at source (TCS) will be available against the tax withheld on the salary income by the employer, which will ease the cash flow issue for the employee and avoid potential refund claim at the time of filing return of income. This is effective 01 October 2024.
4. Short term capital gains rates on sale of equity oriented mutual funds, equity shares have been increased to 20% from the existing rate of 15%. Short term capital gains on sale of other financial assets will be taxed at 30% effective 23 July 2024.
Also Read | Budget 2024 Income Tax changes EXPLAINED: Salaried taxpayers to save Rs 17,500! How standard deduction hike, income tax slab changes in new tax regime will benefit you
5. The FM announced that long-term capital gains on sale of all financial and non-financial assets will attract a tax rate of 12.5% as against the existing rate of 10%. Additionally, the limit of exemption for long-term capital gains will be enhanced to Rs 1.25 lakh per year from the existing threshold of Rs 1 lakh per year for STT paid equity shares and units of equity oriented funds. Unlisted bonds and debentures, debt mutual funds and market linked debentures, will attract tax on capital gains at applicable rates, irrespective of the period of holding. These changes are effective 23 July 2024.
6. Exemption available to shareholders for buy-back of shares have been withdrawn. It will be treated as deemed dividend going forward. Cost of such shares to be considered as Capital Loss and is proposed to be allowed to be set off against other capital gains or carried forward to future years.
7. The FM has also brought in uniformity in the holding period of capital assets with her proposal to classify all listed financial assets as long-term if held for more than 1 year and all unlisted financial assets and non-financial assets will be considered long term if held for more than 2 years. Units of business trusts to be treated at par with listed equity shares in terms of holding period reduced to 12 months now. It is also proposed that Indexation benefit available for long term capital assets is proposed to be removed for calculation of any long-term capital gains. These changes are effective 23 July 2024.
Also Read | Budget 2024 has good news for NPS tax savings: Employer contributions increased from 10% to 14% of employee’s basic salary
8. With an intent to simplify withholding tax provisions, the FM has proposed several changes to TDS provisions such as merging TDS at 5% on many payments into the 2% TDS rate; TDS of 20% applicable to payments on repurchase of units by mutual funds or UTI is proposed to be withdrawn. These changes are effective 01 October 2025 except for TDS on payment of insurance commission which is effective AY 2025-26.
9. Further, FM proposed decriminalising delay in payment of TDS up to the date of filing the statement effective 01 October 2024. This means that if there is a delay in the payment of TDS by the taxpayer, there will be no risk of prosecution, provided the payment is made by the time of filing the TDS return. This approach aims to reduce the burden on tax deductors and shift the focus from prosecution to ensuring timely compliance and payment within the stipulated filing deadline.
10. It is proposed to eliminate penalties for Indian professionals working for multinationals who do not report overseas movable assets, such as ESOPs and social security contributions (other than immovable property), valued at up to Rs 20 lakhs, which currently attract penalties under the Black Money Act with effect from 01 October 2024.
11. In order to simplify re-assessments and bring-in certainty, the FM proposed to that re-assessment can be initiated beyond 3 years from the end of the assessment year only if the escaped income is Rs 50 lakhs or more, and up to a maximum period of five years from the end of the assessment year. Similarly, in search cases, the time limit has been proposed to be reduced to 6 years before the year of search, from the existing limit of 10 years.
