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Till now, the long-term capital gains (LTCG) from sale of listed equity shares or units of equity oriented mutual funds above Rs 1 lakh were taxed at 10%.
By aligning the tax policy with the aspirations of the middle class, Budget 2024 has the potential to focus on inclusive growth, explain Akhil Chandna and Sarthak Prashar
In order to encourage taxpayers to shift to the new tax regime (NTR), the standard deduction under it has been raised from Rs 50,000 to Rs 75,000. There are no changes to the surcharge and education cess. Also, there are no changes in the old tax regime.
Government employees get a 14% deduction on their National Pension System (NPS) contributions. Now the deduction on employer’s contribution to private sector employees who opt for the NTR has been raised from 10% to 14%.
The deduction on family pension has been raised from Rs 15,000 to Rs 25,000. This will ensure family pensioners better financial stability.
The tax collected at source (TCS) and the tax deducted at source (TDS) on income other than salary shall be taken into account for deduction of tax on the salary income. This will address the cash flow issues faced by taxpayer employees against the TDS on salary by claiming TCS on foreign remittances, purchase of vehicles, etc., and TDS on income such as interest, dividend, etc.
Earlier, tax collected at source (TCS) could not be claimed by any person other than the collectee themselves. However, Budget 2024 proposes to allow the credit of TCS to parents of their minor child. This shall only be allowed where the income of the minor is clubbed in the hands of parents.
The government has reduced the tax deducted at source (TDS) by certain individuals/HUF on payment of rent above Rs 50,000 per month to resident landlords from 5% to 2%. This will ensure better compliance by taxpayers and increase the net in-hand rental income of those leasing out their house property.
Till now, the long-term capital gains (LTCG) from sale of listed equity shares or units of equity oriented mutual funds above Rs 1 lakh were taxed at 10%. The exemption limit has now been raised to Rs 1.25 lakh. However, the rate of tax has been raised to 12.5%.
For capital assets other than listed equity shares or units of equity oriented mutual funds, the LTCG was taxable at 10% without indexation benefit and at 20% with indexation benefit. With the rationalisation of the tax rate to 12.5%, the indexation benefit has been removed to ease computation of capital gains for the taxpayer and the tax administration.
There has been exponential growth in trading of derivatives (futures and options market). Therefore, it is proposed to increase the securities transaction tax (STT) on sale of an option in securities from 0.0625% to 0.1% of the option premium and on the sale of futures to 0.02% from 0.0125% of the prices at which such futures are traded.
Gains from selling equity shares or equity oriented mutual funds held for less than 12 months will now be taxed at 20% against 15% earlier. This has been done to reduce the benefit flowing from the earlier reduced tax rate to high net-worth individuals. However, such increased tax rates will also have an impact on middle-class taxpayers.
The direct tax Vivad se Vishwas Scheme, 2020 was introduced to reduce the number of pending income tax litigations and help taxpayers by offering them savings and certainty. Given the success of the scheme and the mounting pendency of appeals at CIT(A) level, a Direct Tax Vivad se Vishwas Scheme, 2024 has been proposed. The scheme shall have effect from the date which shall be notified by the government.
This article first appeared in Financial Express on 25 July 2024.
