Due to the 2024 general elections, this time the Union Budget will be presented in July 2024. Due to this, changes in income tax rules came into effect in the middle of the year. Now, the impact of these new rules will be felt while filing Income Tax Returns (ITR) in 2025. These include tax slabs, TDS, capital gains tax, and other provisions. Come, let us know how these changes will affect your salary, investments, and tax savings.
New tax system: No tax up to Rs 3 lakh
The government has made major changes in the tax slabs in the new tax system.
- Earlier, there was no tax on income up to ₹2.5 lakh.
- Now this limit has been increased to ₹3 lakh.
New tax slabs:
| Income limit (₹) | Tax Rate (%) |
|---|---|
| 0 – 3,00,000 | 0% |
| 3,00,001 – 7,00,000 | 5% |
| 7,00,001 – 10,00,000 | 10% |
| 10,00,001 – 12,00,000 | 15% |
| 12,00,001 – 15,00,000 | 20% |
| more than 15,00,001 | 30% |
In the new system the tax on income has been reduced. For example, an individual can save up to ₹17,500 annually under the new arrangement.
Standard deduction: new limit
The standard deduction is a way to reduce taxable income.
- In the new system, this limit has been increased from ₹ 50,000 to ₹ 75,000.
- For pensioners: This limit has been increased from ₹15,000 to ₹25,000.
- Old system: There is no change in it; The limit is ₹50,000 and ₹15,000 only.
New limit of deduction in NPS
In the new system, the deduction limit on National Pension System (NPS) has been increased.
- Earlier: Deduction up to 10% of basic salary.
- Now: This limit has been increased to 14%.
Importance:
If your basic salary is ₹1 lakh, you can avail deduction up to ₹14,000. It reduces taxable income, resulting in less tax to be paid.
Why not change the old system?
According to CA Manan Tahim, the government wants to gradually end the old system.
- Earlier, tax exemptions were meant to promote investment.
- Now, most people have become aware of investment options.
- The government is focusing on a new system, where no exemption is given on investment.
For whom is the old system better?
- The old system is beneficial for those with annual income less than ₹10 lakh.
- In this, tax exemption is available on investments like mutual funds and PF.
- The new system is better for those with income above ₹10 lakh.
Change in TDS rates
Changes have been made to simplify TDS (Tax Deducted at Source) rates.
| type of income | First (%) | Now (%) |
|---|---|---|
| insurance commission | 5% | 2% |
| Rent | 5% | 2% |
| e-commerce payments | 1% | 0.1% |
TDS on salary will be reduced:
- Tax deducted on other income (like bank interest) and expenses (like property purchase) can be adjusted from salary TDS.
- With this, less tax will be deducted from your salary.
Capital Gains Tax: New provision
- Short-Term Capital Gains (STCG):
- Earlier: 15% tax.
- Now: 20% tax.
- Long-Term Capital Gains (LTCG):
- Now 12.5% tax rate on all properties.
- The exemption limit on shares and mutual funds has been increased from ₹1 lakh to ₹1.25 lakh.
Tax on selling house:
- Option of 20% tax (with indexation) or 12.5% tax (without indexation) on homes purchased before July 23, 2024.
- Homes purchased after July 22, 2024 will not get the benefit of 12.5% tax and indexation.
Aadhaar card now mandatory
From October 1, 2024, Aadhaar card will be mandatory for PAN card or ITR filing.
- Earlier the Aadhaar enrollment number was valid, which will no longer be valid.
- This change is to prevent tampering and ensure identification.
