Finance Minister Smt. Nirmala Sitharaman presented the Union Budget for the Fiscal Year 2024-25, emphasizing extensive tax reforms and economic stimulus measures. The budget aims to provide relief to salaried individuals and pensioners by introducing simplified tax structures, reducing tax burdens, and broadening the tax base.
Key Highlights
Changes to LTCG and STCG Holding Periods for Capital Gains Calculation Across Equity, Property, Gold, Financial, and Non-Financial Assets in Budget 2024.
The Budget 2024 proposes to streamline the holding periods used in calculating capital gains taxes across different asset classes. Under the new proposal, there will be two standardized holding periods: 12 months and 24 months.
Specifically:
- Listed securities, including equity shares and units of listed business trusts, will have a 12-month holding period for determining capital gains.
- For all other assets such as bonds, debentures, and gold, the holding period will be 24 months, reduced from the previous 36 months.
- Unlisted shares and immovable property will continue to have a holding period of 24 months.
This revision aims to simplify the taxation process and provide consistency across various asset categories.
Reduced LTCG Tax Rate and Shortened Holding Period for Gold Investments
Budget 2024 has shortened the holding period for gold to qualify for long-term capital gains from 36 months to 24 months, and concurrently reduced the LTCG tax rate to 12.5%. Additionally, indexation for LTCG calculations on gold has been eliminated.
Previously, indexation allowed sellers to adjust the cost of acquiring gold and gold jewellery for inflation when calculating long-term capital gains. If gold was held for more than three years, gains from its sale were considered long-term and taxed at 20%. Under the new rules, long-term capital gains on gold sold after holding it for 24 months will be taxed at a flat rate of 12.5%, down from 20% previously applied after a 36-month holding period.
Increased Tax Savings on NPS Contributions in Budget 2024
In Budget 2024, the NPS contribution limit for employers in the private sector has been increased from 10% to 14% of the employee’s basic salary. This change applies to both private and public sector employees, but is exclusive to the new tax regime. Employees opting for the new tax regime can now avail a higher deduction, up to 14% of their basic salary, for contributions made by their employer to NPS under Section 80CCD(2).
Reduced TDS Rate on Rent Exceeding Rs 50,000/month to 2%
Under section 194-IB, individuals or Hindu undivided families paying rent exceeding fifty thousand rupees per month to a resident were required to deduct 5% of such income as income-tax. It has now been proposed to reduce the TDS rate under section 194-IB from 5% to 2%.
Reduced Time Limit for Income Tax Reassessment
The proposed changes include reducing the reassessment time limit from ten years to five years. Additionally, there are plans to streamline the reassessment procedure. The reference to Principal Chief Commissioner or Chief Commissioner in section 275 will be omitted to clarify the time limitation for penalty imposition. Furthermore, it is proposed to withhold refunds for up to sixty days after assessment under section 245 and rationalize the time limit for filing appeals to ITAT under section 253.
TCS on Foreign Remittances and Car Purchases Can Offset TDS on Salary
Budget 2024 introduces a new proposal to decrease higher tax deductions for individuals. As part of this change, employees can now notify their employers about Tax Collected at Source (TCS) paid on specific expenses, such as foreign remittances, international travel etc. By doing so, individuals can reduce their Tax Deducted at Source (TDS) on their salary, resulting in a lower tax liability.
Removal of Indexation Benefit and New LTCG Rate for Property Sales
Budget 2024 has abolished the indexation benefit for property sales, impacting individuals who sell their properties. Previously, sellers could inflate the purchase price using indexation, reducing their capital gains. The long-term capital gains tax rate was 20% with indexation. However, as per the Budget 2024 documents, a new tax rate of 12.5% without indexation benefit will now apply to capital gains from property sales. This change will significantly affect property sellers.
Increase in STT on F&O to 0.02% and 0.1%
The 2024 budget has introduced two significant changes. Firstly, it has increased the Securities Transaction Tax (STT) on Futures to 0.02% and on Options to 0.1%. Secondly, it has made income received from share buybacks taxable in the hands of the beneficiaries, closing a potential tax loophole.
Increased Standard Deduction Limit in New Tax Regime
In a welcome move, the Finance Minister has announced a significant increase in the standard deduction amount under the new tax regime. The standard deduction limit has been hiked to:
– ₹75,000 for salaried individuals (up from 50,000)
– ₹25,000 for family pensioners (up from ₹15,000)
This hike, the first in five years, will result in increased tax savings for both salaried individuals and pensioners. The enhanced standard deduction will provide much-needed relief and boost the take-home pay of eligible taxpayers.
Proposed New Income Tax Slabs in Budget 2024
The Finance Minister has introduced relaxed income tax slabs for the new tax regime for FY 2024-25 in Budget 2024. The newly announced income tax slabs are as follows:
Income Slabs | Tax Rate |
0 – 3 Lakh rupees | NIL |
3 – 7 Lakh rupees | 5 % |
7 – 10 Lakh rupees | 10 % |
10 – 12 Lakh rupees | 15% |
12 – 15 Lakh rupees | 20 % |
Above 15 Lakh rupees | 30 % |
Decriminalization of TDS Payment Delays
In a significant move, the government has decriminalized the delay in payment of Tax Deducted at Source (TDS). This decision is expected to bring relief to taxpayers who were earlier liable to face criminal prosecution for delayed payments.
Under the earlier regime, delayed payment of TDS attracted penalties, interest, and even criminal prosecution under Section 276B of the Income Tax Act.
The decriminalization of TDS payment delays is a welcome move, aligning with the government’s vision of a more taxpayer-friendly regime. By replacing criminal prosecution with a penalty regime, the government has demonstrated its commitment to reducing litigation and promoting ease of doing business.
Conclusion
In conclusion, Budget 2024 marks a significant overhaul of India’s tax landscape, ushering in a new era of simplicity, consistency, and taxpayer relief. By rationalizing holding periods, reducing tax rates, and enhancing deductions, the government aims to boost economic growth, encourage investments, and increase tax compliance. While some changes may require adjustments, the overall impact is expected to be positive, making it essential for taxpayers to understand and leverage these changes to maximize their benefits.
