Income Tax Slabs 2024-25 Budget 2024 Highlights & Announcements: Standard deduction hiked, tax slabs changed - taxpayers will save Rs 17,500! Capital gains tax regime changed

The deduction under Section 80CCD(2) is set to be raised from 10% to 14% of the basic salary. This section permits you to contribute up to 10% of your basic pay to NPS tax-free. Previously, only government employees were eligible for the 14% deduction, but now this benefit has been extended to the private sector as well.

Currently, if you file an I-T return claiming a refund, and assessment proceedings are pending for any earlier year, the I-T officer can withhold the refund till the completion of earlier year's assessment if they think that the 'interest of the revenue will be adversely affected'. But, the officer has to obtain the commissioner's nod.

At present, a salaried employee may declare income, such as bank interest and rent, to their employer, who factors this and, accordingly, deducts a higher tax against the monthly salary. The employee then does not have to worry about paying advance tax as adequate tax has already been withheld.

A similar norm comes into effect from Oct 1. The salaried employee will be able to declare TCS and the employer will factor this in, resulting in a lower TDS against salary income. Thus, it will avoid cash-flow issues. Further, if a refund was due, owing to TCS, the individual taxpayer will no longer have to wait for it as it is adjusted against TDS on salary income.

The Union Budget, presented by FM Nirmala Sitharaman, revealed a mixed bag of allocations for the education sector, with some areas receiving substantial increases while others faced cuts. The minister announced a significant increase for PM Poshan scheme and govt support for loans up to Rs 10 lakh for higher education in domestic institutions.

Student aid for higher education saw an enhancement of Rs 493 crore, up from Rs 1,320 crore to Rs 1,813.2 crore. Additionally, funding for research, innovation and apprenticeships was prioritised, with an increase of Rs 162 crore for research (from Rs 193.4 crore to Rs 355 crore) and a boost in National Apprenticeship Training Scheme from Rs 460 crore to Rs 600 crore. On the flip side, the budget for education saw a reduction of Rs 9,090.4 crore from the revised estimate of 2023-24, bringing the allocation down to Rs 1,20,627.8 crore for 2024-25. This 6.8% increase from the previous year's Budget estimate still reflects a reduction when considering the revised figures.

Which income tax regime should you choose after Budget 2024 – the old regime or the revised new tax regime? If you are already filing returns under the existing new regime, how much benefit will you get from the revised version? Finance Minister Nirmala Sitharaman announced that the standard deduction hike and new income tax slabs under the revised new regime will save salaried taxpayers Rs 17,500. To understand your potential savings at different salary levels, we examine 10 tables from EY detailing the new income tax changes and their impact on taxpayers at various income levels.

The contribution limit for employers in the private sector has been raised from 10% to 14% of the employee's basic salary. This new limit applies to both private and public sector employees, exclusively under the new tax regime. Shalini Jain, Tax Partner, People Advisory Services at EY India, emphasises that this increase will enable employees opting for the new tax regime to save more taxes and build a larger pension pool for social security.

The hike in standard deduction will benefit salaried individuals and pensioners by reducing their taxable income, thereby lowering their tax liability. The standard deduction is a fixed amount that taxpayers can deduct from their gross income without needing to provide detailed expense proofs.

At various income levels, the benefits will vary. The base income tax benefit of Rs 17,500 announced by FM Sitharaman does not include the cess. It also doesn't include surcharge at higher income levels. As per the analysis by EY, you will now have to pay zero tax of income up to Rs 7.75 lakh. For income up to Rs 10 lakh, you will annually save Rs 10,000 (without cess). If one were to include cess then the benefit will go up.

Rationalisation of tax deducted at source (TDS) rates: It is proposed to bring down TDS rates from 5 per cent to 2 per cent in certain sections and omit section 194F where TDS rate is 20 per cent, as given below:

• Buy-back of shares: It is proposed that the income from buy-back of shares by companies be chargeable in the hands of recipient investor as dividend, instead of the current regime of additional income-tax in the hands of the company. Further, the cost of such shares shall be treated as a capital loss to the investor.
• Securities transaction tax (STT) rates: It is proposed to increase the rates of STT on sale of an option in securities from 0.0625 per cent to 0.1 per cent of the option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02 per cent of the price at which such futures are traded.
• Income from letting out of house property: It is proposed that income from letting out of a house or part of the house by the owner, shall not be charged under the head ‘profits and gains of business or profession’ and will be chargeable to tax under the head ‘income from house property’ only.
• Transfer of capital asset: It is proposed to provide that the transfer of a capital asset, under a gift or will or an irrevocable trust, by an entity other than an individual or a Hindu undivided family (HUF) only, shall be regarded as transfer for the purpose of calculation of capital gain.
• TDS on payment to a partner: It is proposed that payments made by firm to its partner in the nature of salary, remuneration, commission, bonus and interest, etc shall be subject to TDS at the rate of 10 per cent for aggregate amounts more than ` 20,000 in a financial year.
• TCS on notified luxury goods: To enable TCS on luxury goods, it is proposed to levy TCS of 1 per cent on notified goods of value exceeding ten lakh rupees.
• TDS on sale of immovable property: It is proposed to clarify that where there is more than one transferor or transferee in respect of an immovable property, then such consideration for transfer of the immovable property shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors for transfer of such immovable property.
• TDS on Floating Rate Savings (Taxable) Bonds (FRSB) 2020: TDS is proposed on interest exceeding ten thousand rupees on Floating Rate Savings (Taxable) Bonds (FRSB) 2020 or any other notified security of the Central or State Governments.
• Inadmissibility of non-business expenditure by life insurance companies: It is proposed to provide that any expenditure which is not admissible under the provisions of section 37 in computing the profits and gains of a business shall be included to the profits and gains of the life insurance business.
• Inclusion of taxes withheld outside India for purposes of calculating total income: It is proposed to provide that income tax paid outside India by way of deduction is deemed to be income received for the purpose of computing the income of the assessee.
• Excluding income mentioned in section 194J from applicability of section 194C: It is proposed to explicitly state that any sum referred to in sub-section (1) of section 194J (fees for professional or technical services) does not constitute “work” for the purposes of TDS under section 194C (payments to contractors).
• Claim of settlement amounts as business expenditure: It is proposed to disallow expenses incurred as settlement fees for any contravention of law, as may be notified by the Central Government.
• Definition of Fair Market Value (FMV): It is proposed to provide for a method of calculation of fair market value on 31.01.18 under section 55(2) (ac) in the case of sale of unlisted equity shares in an offer for sale in an initial public offer.

“Coming to Personal Income Tax Rates, I have two announcements to make for those opting for the new tax regime. First, the standard deduction for salaried employees is proposed to be increased from Rs 50,000/- to Rs 75,000/-. Similarly, deduction on family pension for pensioners is proposed to be enhanced from Rs 15,000/- to Rs 25,000/-. This will provide relief to about four crore salaried individuals and pensioners.

Second, in the new tax regime, the tax rate structure is proposed to be revised, as follows:

• 0-3 lakh rupees - NIL tax
• 3-7 lakh rupees - 5% tax
• 7-10 lakh rupees - 10% tax
• 10-12 lakh rupees - 15% tax
• 12-15 lakh rupees - 20% tax
• Above 15 lakh rupees - 30% tax

As a result of these changes, a salaried employee in the new tax regime stands to save up to Rs 17,500/- in income tax,” said FM Nirmala Sitharaman.