The Union Budget 2024, presented by the Finance Minister, has introduced several significant changes in the taxation landscape. These changes are aimed at simplifying the tax structure, widening the tax net, and providing relief to individual taxpayers. In this detailed blog, we will explore the key highlights of the budget with a focus on direct tax changes, which include an overhaul of capital gains taxes, an increase in the standard deduction, and revised income tax slabs.
One of the most notable changes in this budget is the overhaul of capital gains taxes, effective from July 23, 2024:
1. Short-Term Capital Gains (STCG)
- STCG on all financial assets will be taxed at 20%. This uniform rate simplifies the tax structure and aims to boost revenue from short-term financial transactions.
- For other assets, STCG taxation remains unchanged, providing continuity for non-financial investments.
2. Long-Term Capital Gains (LTCG)
- LTCG on all assets will now be taxed at 12.5%. This rate aims to encourage long-term investments across various asset classes.
- The exemption limit under Section 112A for LTCG has been increased to ₹1,25,000. This higher exemption threshold is expected to benefit retail investors by reducing their taxable capital gains.
To provide relief to salaried individuals and pensioners, the standard deduction under the new tax regime has been increased from ₹50,000 to ₹75,000. This move is expected to reduce the taxable income for a large number of taxpayers, thereby increasing their disposable income.
The budget also includes an increase in the Security Transaction Tax (STT):
- Futures and Options: STT on these transactions will be increased by 0.02%. This change is likely to impact the cost of options trading in the derivatives market.
- Securities: STT on securities transactions will be increased by 0.01%, affecting the overall cost of equity trading.
A new provision under Section 194T introduces a Tax Deducted at Source (TDS) of 10% for remuneration paid to partners of a partnership firm exceeding ₹20,000. This move aims to ensure better compliance and tax collection from partnership firms.
The new tax regime has seen a revision of income tax slabs, making it more progressive:
- ₹0 - 3,00,000: Nil
- ₹3,00,000 - 7,00,000: 5%
- ₹7,00,000 - 10,00,000: 10%
- ₹10,00,000 - 12,00,000: 15%
- ₹12,00,000 - 15,00,000: 20%
- Above ₹15,00,000: 30%
These revised slabs are designed to provide tax relief to middle-income groups while ensuring that higher income groups contribute more significantly to tax revenue.
The Union Budget 2024 brings forth several substantial changes in the tax regime aimed at simplifying the tax structure, increasing compliance, and providing relief to taxpayers. The overhaul of capital gains taxes, increased standard deduction, revised income tax slabs, and new TDS provisions reflect the government's commitment to fostering a more equitable and efficient tax system. Taxpayers should review these changes carefully and consult with tax professionals to understand their full implications and optimise their tax planning strategies.
These updates underscore the importance of staying informed about tax regulations and making necessary adjustments to financial planning. As the new fiscal year approaches, it is crucial for individuals and businesses to align their strategies with the latest tax policies to maximise benefits and ensure compliance.
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