Union Budget 2024: Key changes in direct taxes announced by FM

Direct tax is a type of tax that is paid by an individual directly to the government

Union Finance Minister Nirmala Sitharaman tabled the Union Budget 2024-25 in the Parliament on Tuesday. And yes, there were changes in direct taxes as expected.

 

Here are the key changes:
 

Income tax slabs revision

 

New tax regime: 
 

The income tax slabs under the new tax regime have been revised, allowing for greater tax savings. The new slabs are as follows:

 

Up to Rs 3,00,000: Nil

Rs 3,00,001 to Rs 7,00,000: 5 per cent 

Rs 7,00,001 to Rs 10,00,000: 10 per cent 

Rs 10,00,001 to Rs 12,00,000: 15 per cent 

Rs 12,00,001 to Rs 15,00,000: 20 per cent 

Above Rs 15,00,000: 30 per cent 

 

This change expands the previous slab of Rs 3 lakh to Rs 6 lakh to now cover Rs 3 lakh to Rs 7 lakh, while keeping the tax rates unchanged.

“The revised income tax slabs could potentially provide taxpayers with a net gain of around Rs 17,500 per year. These changes are part of an effort to reduce the tax burden on lower-income earners,” said Adhil Shetty, CEO of Bankbazaar.com.

 

Standard deduction increase: 

 

The standard deduction for salaried employees has been increased from Rs 50,000 to Rs 75,000, which is expected to provide additional relief to taxpayers.

“This increase will provide additional relief by lowering taxable income, allowing taxpayers to save more and improving their overall financial health. It is especially beneficial for middle-income earners, as it enhances their disposable income and encourages savings and investment,” Shetty said.

Family pension deduction: 

 

The deduction limit for family pensioners has been raised from Rs 15,000 to Rs 25,000.

 

Long-term capital gains (LTCG) tax

 

The long-term capital gains tax rate has been proposed to increase from 10 per cent to 12.5 per cent.

 

Short-term capital gains (STCG) tax

Short-term capital gains on certain assets will attract a 20 per cent tax, while all other financial and non-financial assets will be taxed at the applicable income tax rate.

 

“The widening gap between STCG and LTCG rates is a clear incentive for longer-term holdings, which aligns with our view of creating sustainable wealth. This move is also a step towards standardising taxation across various asset classes, potentially simplifying the investment decision-making process for many,” said Rajarshi Dasgupta, Executive Director, AQUILAW.

 

The limit of exemption of capital gains on certain financial assets has been increased to Rs 1.25 lakh per year. In addition, the Finance Minister also announced a hike in STT (securities transaction tax) on F&O (futures and options) securities by 0.02 per cent and 0.1 per cent in order to discourage retail investors from trading in the risky market segment.