Introduction
In the 2024 budget, significant changes have been introduced in the tax landscape of India. These changes encompass new tax slab rates, modifications in capital gains taxation, enhancements in standard deductions, and notable updates in the National Pension System (NPS). This comprehensive guide aims to provide a detailed breakdown of these changes to help taxpayers navigate the new fiscal environment effectively.
Updated Tax Slab Rates for FY 2024-25
New Regime vs. Old Regime
The 2024 budget introduces revised tax slab rates under the new tax regime while retaining the old regime. Taxpayers can choose between the two based on their financial situations and preferences.
New Regime Tax Slabs
Income up to ₹2.5 lakh: No tax
Income from ₹2.5 lakh to ₹5 lakh: 5%
Income from ₹5 lakh to ₹7.5 lakh: 10%
Income from ₹7.5 lakh to ₹10 lakh: 15%
Income from ₹10 lakh to ₹12.5 lakh: 20%
Income from ₹12.5 lakh to ₹15 lakh: 25%
Income above ₹15 lakh: 30%
Old Regime Tax Slabs
Income up to ₹2.5 lakh: No tax
Income from ₹2.5 lakh to ₹5 lakh: 5%
Income from ₹5 lakh to ₹10 lakh: 20%
Income above ₹10 lakh: 30%
Capital Gains Taxation Changes
Short-term and Long-term Capital Gains
The 2024 budget has streamlined the capital gains taxation system, ensuring clarity and uniformity.
Short-term Capital Gains (STCG)
Assets held for less than 36 months: Taxed at applicable individual income tax rates.
Long-term Capital Gains (LTCG)
Assets held for more than 36 months: 10% tax without indexation benefits for gains exceeding ₹1 lakh.
Impact on Different Asset Classes
Equity Shares and Mutual Funds: Gains exceeding ₹1 lakh taxed at 10% without indexation.
Debt Funds and Other Assets: Gains taxed at 20% with indexation benefits.
Enhanced Standard Deduction
Salaried and Pensioners
The standard deduction for salaried individuals and pensioners has been increased to provide additional relief amidst inflationary pressures.
Standard Deduction: Increased from ₹50,000 to ₹75,000.
National Pension System (NPS) Updates
Contribution Limits and Tax Benefits
The NPS has seen several updates, enhancing its attractiveness as a retirement savings option.
Contribution Limits
Government Employees: Enhanced tax deduction limit under Section 80CCD(1B) increased from ₹50,000 to ₹1 lakh.
Private Sector Employees: No change in the contribution limits.
Tax Benefits
Withdrawal Benefits: Tax exemption on withdrawal up to 60% of the corpus at the time of retirement remains unchanged.
Tier-II NPS Accounts: Investments in Tier-II accounts now eligible for tax deductions under Section 80C.
Effective Dates of Changes
Implementation Timeline
The changes announced in the 2024 budget will be effective from the following dates:
Tax Slab Rates and Standard Deduction: Effective from April 1, 2024, for FY 2024-25.
Capital Gains Taxation: Applicable to transactions from April 1, 2024.
NPS Updates: Changes in contribution limits and tax benefits effective from April 1, 2024.
Conclusion
The 2024 budget brings about significant changes aimed at simplifying the tax structure and providing relief to taxpayers. Understanding these changes is crucial for effective financial planning and optimizing tax liabilities. Taxpayers are encouraged to evaluate their financial situations and choose the tax regime that best suits their needs while taking advantage of the enhanced standard deduction and updated NPS benefits.
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