The Union Budget 2024 introduces significant changes to India's tax structure, impacting salaried individuals and investors alike. For salaried employees, the new tax regime offers an increased standard deduction of ₹75,000 and revised tax slabs, potentially reducing tax liability. Consider the example of an IT professional Sunil, who earns ₹10 Lakhs annually. As per the changes announced in the budget, if he files his taxes in the new regime, he can now save up to ₹10,000 in taxes.
The budget also modifies capital gains taxation on listed investments. Short-term capital gains (STCG) tax has been increased from 15% to 20%. For long-term capital gains (LTCG), the tax rate has been raised to 12.5%, but with an increased exemption limit of ₹1.25 Lakhs. So, if Sunil chooses to sell off his investments after earning a profit of ₹10,500 in 9 months, he will have to pay 20% tax or ₹2,100. Alternatively, suppose he holds on to his shares for 2 years and earns around ₹23,000. Now, he will have to pay LTCG tax. But since his returns are less than ₹1 Lakh, he is tax-exempt.
The budget brings a notable shift in property taxation by eliminating indexation benefits for LTCG on property sales. Despite reducing the LTCG tax rate to 12.5% for property, the removal of indexation could result in higher taxable gains. These alterations could lead to increased tax liability on property sales, notwithstanding the lower tax rate. These changes collectively reshape the landscape of personal finance and investment strategies in India.
The standard deduction has increased to ₹75,000, reducing taxable income for salaried employees significantly
Revised tax slabs lower the tax burden for individuals earning ₹10 Lakhs, saving them ₹10,000 annually
Short-term capital gains tax has risen to 20%, affecting investors who withdraw their shares
Long-term capital gains tax is now set at 12.5%, but the exemption limit has increased to ₹1.25 Lakhs
The removal of indexation benefits for property sales alters effective capital gains calculations, possibly leading to higher tax liabilities
Taxpayers must navigate new tax implications based on their investment strategies and withdrawal decisions
The budget aims to provide tax relief while ensuring appropriate taxation of investment returns
These changes require reassessing personal financial strategies for employees, stock market speculators, and property holders