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Tata Capital > Blog > Wealth Services > Key Personal Income Tax Slabs Suggested in the Final Budget 2024-25?

Wealth Services

Key Personal Income Tax Slabs Suggested in the Final Budget 2024-25?

Key Personal Income Tax Slabs Suggested in the Final Budget 2024-25?

Finance Minister Nirmala Sitharaman presented the Union Budget 2024 on July 23. She is the first Indian Finance Minister to present the Union Budget for seven consecutive years. In her speech, Sitharaman introduced several significant changes for the country’s economic transformation and major relief for taxpayers.

These proposed changes highlight the government’s commitment to fostering a more equitable and efficient tax system. Here are some significant personal income tax changes you must be aware of:

Revised Income Tax Slabs

The Union Budget 2024 introduced a new structure for personal income tax slabs under the new regime:

Up to Rs. 3 lakhsNil
Rs. 3 lakhs to Rs. 7 lakhs5%
Rs. 7 lakhs to Rs. 10 lakhs10%
Rs. 10 lakhs to Rs. 12 lakhs15%
Rs. 12 lakhs to Rs. 15 lakhs20%
Above Rs. 15 lakhs30%

These revised slabs aim to ease the tax burden on lower and middle-class taxpayers. With these changes, salaried employees opting for the new tax regime can save up to Rs. 17,500 in taxes.

Increased Standard Deduction 

In her 2024 budget speech, FM Sitharaman proposed increasing the standard deduction from Rs. 50,000 to Rs. 75,000. This change will provide additional relief to taxpayers, lowering their overall tax liability and ensuring they have more disposable income.

Increased Family Pension Deduction 

FM Sitharaman has also proposed an increase in family pension deduction from Rs. 15,000 to Rs. 25,000. This deduction is specifically for family members receiving a pension due to the death of a government employee. The increase in the deduction limit will provide better financial support to families, reducing their tax burden.

Key Changes in Capital Gains Tax 

The Final Budget 2024 has introduced key modifications to capital gains taxation:

– Short-term capital gains (STCG) tax on listed equity shares and equity mutual funds and units of business trusts where Securities Transaction Tax (STT) is paid  has been increased from 15% to 20%..  And Long-term capital gains (LTCG) tax is increased to 12.5%. Earlier, this rate was 10%. The exemption limit for LTCG has also been increased from Rs. 1 lakh to Rs. 1.25 lakhs in gains.

– LTCG on unlisted equity will be taxed at 12.5% post 24 months of holding period, earlier it was 20% with indexation.

– Unlisted bonds and debentures, listed and unlisted market linked debentures, and Debt mutual funds bought post 1 April 2023 and sold on or after 23 July 2024 will attract tax on capital gains at individual’s slab rates irrespective of holding period.

– Indexation benefit has been removed from all asset classes.

Let’s look at an example to understand how this will impact investors:

Suppose Avinash invested Rs. 10 lakhs in a mutual fund. After a year, his assumed return is 20%. Here’s how his tax will be calculated before and after the new budget:

FactorBeforeNow
Tax10%12.5%
ExemptionRs. 1 lakhRs. 1.25 lakh
Total Capital GainsRs. 2 lakhsRs. 2 lakhs
Taxable gains(2 lakhs – 1 lakh) = Rs. 1 lakh(2 lakhs – 1.25 lakhs) = Rs. 75,000
Tax to be paidRs. 10,000Rs. 9,375

This means after the Union Budget 2024, Avinash will save Rs. 625 in LTCG tax. However, since STCG tax is 20%, it’s best for Avinash to stay invested for the long term to enjoy the power of compounding and avail of tax benefits.

Increase in STT for Futures and Options

Following the Union Budget 2024, STT for futures has been increased from 0.0125% to 0.02% of the transaction value. For options contracts, the STT has been increased from 0.0625% to 0.1%. This means that trading in these financial instruments will now come with a higher tax cost, which could impact the overall trading expense and affect investment decisions.

NPS Contribution by Employers

FM Sitharaman proposed increasing the limit for employer contributions to the National Pension Scheme (NPS). Currently, employers (excluding government employers) can contribute up to 10% of an employee’s salary to NPS. This limit is now proposed to be increased to 14%.

Conclusion

The Union Budget for 2024 introduced several key changes to personal income tax regulations. Modifications like revised income tax slabs, increased standard deductions under new tax regime, and adjustments to capital gains tax rates aim to simplify the tax structure and provide significant benefits to taxpayers. As these changes come into effect, it’s essential to carefully review your financial strategy to maximise the benefits of these provisions.

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