One of the major updates is the rationalization of the tax rates under the new tax regime, which is expected to bring in a tax savings of up to Rs 17,500 for the taxpayer. Further, the Budget has increased the standard deduction for the salaried and pension receiving taxpayers, to Rs 75,000 from the earlier limit of Rs 50,000. For taxpayers who receive family pension, the deduction has been increased from Rs 15,000 to Rs 25,000. The new tax slabs will be applicable from April 1, 2024 i.e for current financial year.The new tax regime in India, introduced in the Union Budget 2020, is a taxation system with lower tax rates compared to the old regime but with a trade-off of forgoing most of the deductions and exemptions. As the default tax regime of the last fiscal, the Budget 2024 revealed that more than 2/3rd of taxpayers opted for the new tax regime. To promote the new tax regime further as well as to encourage retirement savings, the Budget 2024 has enhanced the deduction for contribution by the employer to National Pension Scheme (NPS) of the employee, from 10% of salary to 14% of salary. This benefit was earlier allowed for government employees only.
Revamp of capital gain taxation
The Budget 2024 has overhauled the provisions relating to capital gains effective 23 July 2024. As regards holding period of the assets for classification into long term or short term, the Budget 2024 proposes to classify all listed financial assets as long term if they are held for more than 12 months and unlisted financial and non-financial assets as long term if they are held for more than 24 months.
Further, with a view to promote long term investments over short term speculation, the tax on short term capital gains on sale of equity shares and equity oriented mutual funds is increased to 20% from the existing rate of 15%. Short term capital gains on sale of other assets will continue to be taxed at applicable rates. Further, long term capital gains on financial and non-financial assets are proposed to be taxed at a rate of 12.5% from the existing rate of 10%/20%. In this regard, one needs to note that post Budget 2024, long term capital gain from sale of listed equity shares, units of equity-oriented fund and business trust is taxable only beyond a limit of Rs 1.25 lakh, which has been enhanced from the existing limit of Rs 1 lakh with a view to further incentivize investors to hold onto their investments for a longer period.
Credit for TCS
Currently, Taxes Collected at Source (TCS) by banks and financial institutions apply to foreign remittances under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India and to certain other payments. The amount collected as TCS can be claimed as a credit against the total tax liability of the remitter when filing the tax return. The Budget 2024 has brought in a provision which will allow the taxpayer to declare the TCS to their employers for consideration at the time of withholding taxes (TDS) from salary. This will help ease cash flow issues for taxpayers who currently have to claim a refund of these taxes in their tax returns.Relaxation of penal provisions
The Budget 2024 provides for de-criminalization of defaults in TDS payments by the deductor (e.g employers), so long as the appropriate taxes are remitted within the due date for filing of the TDS statements. This helps reduce the burden on the tax deductor by shifting the focus from prosecution to ensuring timely compliance and payments within stipulated timelines.
Further, there is relaxation for Indian professionals working in multi-national corporations who may receive ESOPs and as a result hold shares or invest in social security schemes and other movable assets abroad. Non-reporting of such foreign assets by Ordinary Residents typically had penal consequences under the Black Money Act. The same has been de-penalised in Budget 2024 for cases where the aggregate value of the assets is up to Rs 20 lakh.
In relation to assessments, the Budget 2024 has proposed increase in monetary limits for appeal and simplified criteria for re-assessment of income by laying down a minimum period of 3 years and a maximum period of 5 years from the end of the assessment year for initiation of such proceedings. The Government also commits to faster resolution of tax disputes under the Vivad Se Vishwas Scheme 2024.
Focus on convenience
The finance minister has promised a comprehensive review of the income tax law within 6 months, to simplify the same with the intention of reducing litigation and provide more clarity and certainty to the taxpayers. Further, given the way the digitization of the Indian economy has impacted taxation, both in terms of how taxes are collected and how they are complied with, the proposed changes to the tax law are expected to make tax compliance more simple and convenient for taxpayers.
(Authored by Shalini Jain, Tax Partner, EY India. Vijayalakshmi Pg, Senior Manager also contributed to this article)
rewrite this title Budget 2024: New income tax slabs, capital gains tax, key tax changes that impact salaried, other taxpayers
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One of the major updates is the rationalization of the tax rates under the new tax regime, which is expected to bring in a tax savings of up to Rs 17,500 for the taxpayer. Further, the Budget has increased the standard deduction for the salaried and pension receiving taxpayers, to Rs 75,000 from the earlier limit of Rs 50,000. For taxpayers who receive family pension, the deduction has been increased from Rs 15,000 to Rs 25,000. The new tax slabs will be applicable from April 1, 2024 i.e for current financial year.The new tax regime in India, introduced in the Union Budget 2020, is a taxation system with lower tax rates compared to the old regime but with a trade-off of forgoing most of the deductions and exemptions. As the default tax regime of the last fiscal, the Budget 2024 revealed that more than 2/3rd of taxpayers opted for the new tax regime. To promote the new tax regime further as well as to encourage retirement savings, the Budget 2024 has enhanced the deduction for contribution by the employer to National Pension Scheme (NPS) of the employee, from 10% of salary to 14% of salary. This benefit was earlier allowed for government employees only.
Revamp of capital gain taxation
The Budget 2024 has overhauled the provisions relating to capital gains effective 23 July 2024. As regards holding period of the assets for classification into long term or short term, the Budget 2024 proposes to classify all listed financial assets as long term if they are held for more than 12 months and unlisted financial and non-financial assets as long term if they are held for more than 24 months.
Further, with a view to promote long term investments over short term speculation, the tax on short term capital gains on sale of equity shares and equity oriented mutual funds is increased to 20% from the existing rate of 15%. Short term capital gains on sale of other assets will continue to be taxed at applicable rates. Further, long term capital gains on financial and non-financial assets are proposed to be taxed at a rate of 12.5% from the existing rate of 10%/20%. In this regard, one needs to note that post Budget 2024, long term capital gain from sale of listed equity shares, units of equity-oriented fund and business trust is taxable only beyond a limit of Rs 1.25 lakh, which has been enhanced from the existing limit of Rs 1 lakh with a view to further incentivize investors to hold onto their investments for a longer period.
Credit for TCS
Currently, Taxes Collected at Source (TCS) by banks and financial institutions apply to foreign remittances under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India and to certain other payments. The amount collected as TCS can be claimed as a credit against the total tax liability of the remitter when filing the tax return. The Budget 2024 has brought in a provision which will allow the taxpayer to declare the TCS to their employers for consideration at the time of withholding taxes (TDS) from salary. This will help ease cash flow issues for taxpayers who currently have to claim a refund of these taxes in their tax returns.Relaxation of penal provisions
The Budget 2024 provides for de-criminalization of defaults in TDS payments by the deductor (e.g employers), so long as the appropriate taxes are remitted within the due date for filing of the TDS statements. This helps reduce the burden on the tax deductor by shifting the focus from prosecution to ensuring timely compliance and payments within stipulated timelines.
Further, there is relaxation for Indian professionals working in multi-national corporations who may receive ESOPs and as a result hold shares or invest in social security schemes and other movable assets abroad. Non-reporting of such foreign assets by Ordinary Residents typically had penal consequences under the Black Money Act. The same has been de-penalised in Budget 2024 for cases where the aggregate value of the assets is up to Rs 20 lakh.
In relation to assessments, the Budget 2024 has proposed increase in monetary limits for appeal and simplified criteria for re-assessment of income by laying down a minimum period of 3 years and a maximum period of 5 years from the end of the assessment year for initiation of such proceedings. The Government also commits to faster resolution of tax disputes under the Vivad Se Vishwas Scheme 2024.
Focus on convenience
The finance minister has promised a comprehensive review of the income tax law within 6 months, to simplify the same with the intention of reducing litigation and provide more clarity and certainty to the taxpayers. Further, given the way the digitization of the Indian economy has impacted taxation, both in terms of how taxes are collected and how they are complied with, the proposed changes to the tax law are expected to make tax compliance more simple and convenient for taxpayers.
(Authored by Shalini Jain, Tax Partner, EY India. Vijayalakshmi Pg, Senior Manager also contributed to this article)
