Income Tax Budget 2024-25 Highlights: New tax slabs announced, standard deduction raised to Rs 75,000 under new regime

Benchmark indices ended marginally lower on July 23, recovering from intra-day lows after the FM raised LTCG and STCG in her Budget for FY25. The 30-pack Sensex closed 73.04 points, or 0.09 percent, down at 80,429.04 and the Nifty ended 30.30 points, or 0.12 percent, lower at 24,479.00.

On 12.5% tax on long-term capital gains, Finance Minister Nirmala Sitharaman said --

- We wanted to simplify the approach to taxation - also for the capital gains

- Second, if anything, the average taxation has actually come down when we say it is 12.5%

- We have worked out for each of the different asset classes

- The point that we brought it down from below the average to 12.5% encourages investment in the markets

The Government will launch a comprehensive scheme for providing internship opportunities in top companies. This will be the 5th scheme under the Prime Minister’s package.

While presenting the Union Budget 2024-25 in Parliament on July 23, Sitharaman announced that the scheme will provide internship opportunities in 500 top companies to 1 crore youth in five years. They will gain exposure for 12 months to real-life business environment, varied professions and employment opportunities, she said.

An internship allowance of Rs 5,000 per month along with a one-time assistance of Rs 6,000 will be provided to the youth. Companies will be expected to bear the training cost and 10 per cent of the internship cost from their CSR funds, the Finance Minister added.

Finance Minister Nirmala Sitharaman has announced a comprehensive review of the Income-tax Act, 1961. The purpose is to make the Act concise, lucid, easy to read and understand, said Sitharaman. "This will reduce disputes and litigation, thereby providing tax certainty to the tax payers. It will also bring down the demand embroiled in litigation. It is proposed to be completed in six months," she added.

In this Budget, the government has announced ‘Employment Linked Incentive' scheme, said Prime Minister Narendra Modi, adding that it will help generate many employment opportunities. "Under this scheme, the government will give the first salary to those who are newly entering the workforce. Youth from villages will be able to work in the country's top companies under the apprenticeship program," he said.

After the presentation of the Union Budget 2024-25, Prime Minister Narendra Modi said that this budget is for the empowerment of the new middle class. "The youth will get unlimited opportunities from this budget. Education and skill will get a new scale from this budget," he said.

FM Sitharaman said that it has been the government's endeavour to simplify taxation and therefore it has taken a number of measures in the last few years including introduction of simplified tax regimes without exemptions and deductions for corporate tax and personal income tax.

"This has been appreciated by tax payers. 58 percent of corporate tax came from the simplified tax regime in financial year 2022-23. Similarly, as per data available till now for the last fiscal, more than two-thirds have availed the new personal income tax regime," said Sitharaman.

Individuals, Hindu Undivided Family (HUF) and pensioners who were hoping for a hike in tax deduction under Sections 80TTA and 80TTB had to face disappointment on July 23, as Finance Minister Nirmala Sitharaman left tax deductions unchanged.

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Finance Minister Nirmala Sitharaman on Tuesday announced that angel tax will be abolished for all classes of investors in Union Budget 2024. Read more

What FM said on capital gains:

- Short term gains on certain financial assets shall henceforth attract a tax rate of 20 per cent, while that on all other financial assets and all non-financial assets shall continue to attract the applicable tax rate

- Long term gains on all financial and non-financial assets, on the other hand, will attract a tax rate of 12.5 per cent

- Listed financial assets held for more than a year will be classified as long term, while unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term

Deduction on family pension for pensioners is proposed to be enhanced from Rs 15,000 to Rs 25,000, said Finance Minister Sitharaman.

New regime slabs as announced by Finance Minister in Budget 2024-25

0-Rs 3 lakhs: Nil

Rs 3-7 lakhs: 5%

Rs 7-10 lakhs: 10%

Rs 10-12 lakhs: 15%

Rs 12-15 lakhs: 20%

Above Rs 15 lakhs: 30%

Under the new tax regime, standard deduction has been increased from Rs 50,000 to Rs 75,000, announced Finance Minister Nirmala Sitharaman.

FM Sitharaman announced a comprehensive review of the Income Tax Act 1961. This will reduce disputes and litigation, she said, adding that it is proposed to be completed in 6 months.

To simply taxation, we have taken a number of measures in the last few years, said Finance Minister Nirmala Sitharaman.

For the last fiscal, more than two-thirds have availed the new income tax regime, she added.

Fiscal deficit 2024-25 is estimated at 4.9% of GDP, said FM Sitharaman. The aim is to reach below 4.5%, she added.

PM Suryaghar Muft Bijli Yojana has been launched to install rooftop solar panels to enable 1 crore households to obtain free electricity upto 300 units each month, said Sitharaman, adding that the scheme will further encourage it.

Here are the announcements made by Sitharaman:

- Working women hostels will be set up

- Higher participation of women in workforce to be promoted through hostels and creches

- Our government will bring National Cooperation Policy for overall development

- Our government will provide financial support for loans upto 10 lakhs for higher education in domestic institutions

- The Government will launch a scheme to provide internship opportunities to 1 crore youth in 500 top companies with Rs 5000 per month as internship allowance and one-time assistance of Rs 6000

Sitharaman on Tuesday announced that a credit guarantee scheme will be introduced in order to facilitate term loans to MSMEs. The scheme will operate on the cooling of credit risks of such MSMEs. A self-financing guarantee fund will provide to each applicant cover of up to Rs 100 crore while loan amount may be larger.

FM Sitharaman said one month wage will be provided to all persons newly entering the workplace in all formal sectors. Direct benefit transfer of one month salary in three installments to first-time employees as registered in the EPFO will be up to Rs 15,000, she said.

"The eligibility limit will be a salary of Rs 1 lakh per month. The scheme will benefit 210 lakh youth," she stated.

Finance Minister Sitharaman, during her budget speech, announced that the government will implement three schemes for employment-linked incentives as part of the Prime Minister's package. These will be based on enrollment in the EPFO and focus on recognition of the first time employees and support to employees and employers, she said.

The people of India have reposed their faith in the government led by Prime Minister Narendra Modi and re-elected it for the historic third term, said Sitharaman.

"The global economy, while performing better than expected, is still in the grip of policy uncertainties, elevated asset prices, political uncertainties and shipping disruptions continue to pose significant downsize risks to inflation. In this context, India's economic growth continues to be the shining exception and will remain so in the years ahead," she said.

Finance Minister Nirmala Sitharaman began the presentation of her seventh Union Budget speech in the Lok Sabha today. All taxpayers are eagerly waiting for her announcements with regards to income tax.

The Budget will be a journey of resolve to take the country on the path of development and progress, Union Minister Jyotiraditya Scindia said. "It is our hope that on the basis of this budget, we will move rapidly towards achieving the goal of 'Viksit Bharat' as per the resolve of the Prime Minister," he added.

Under the new tax regime, taxable incomes of up to Rs 15 lakh attract a tax rate of 20 percent, and beyond Rs 15 lakh, the tax rate is 30 percent. A tax bracket of 25 percent does not exist. "So, there’s scope to introduce this additional bracket for Rs 15-20 lakh incomes. The 30 percent tax rate will then be applicable for taxable incomes of over Rs 20 lakh," Pankaj Mathpal, Founder, Optima Money Managers, a financial advisory firm, told Moneycontrol.

Finance Minister Nirmala Sitharaman, carrying the Budget tablet, arrived at Parliament along with her team to present the Union Budget in Lok Sabha.

Her Budget speech will begin at 11 am today.

A distinctive deduction for National Pension System (NPS) investments was introduced in FY16. This allows taxpayers investing up to Rs 50,000 in their NPS Tier 1 account to claim an additional deduction under Section 80CCD (1B) of the Income-tax Act. This benefit is exclusive to NPS, setting it apart from other investment options that only qualify for deductions under Section 80C. However, financial experts argue that the current NPS deduction limit should be raised to further incentivize retirement savings.

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Up to Rs 2,50,000: Nil

Rs 2,50,001 to Rs 5,00,000: 5%

Rs 5,00,001 to Rs 7,50,000: 10%

Rs 7,50,001 to Rs 10,00,000: 15%

Rs 10,00,001 to Rs 12,50,000: 20%

Rs 12,50,001 to Rs 15,00,000: 25%

Above Rs 15,00,000: 30%

Tax experts argue for increasing the basic exemption limit under the new tax regime from the current Rs 3 lakh to Rs 5 lakh. Additionally, to account for rising inflation, they suggest the government should consider doubling the standard deduction for salaried employees and pensioners from Rs 50,000 to Rs 1 lakh, at least within the new tax structure. This flat tax relief would provide greater financial flexibility to taxpayers facing increased living costs.

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Section 24(b) of the Income Tax Act allows deduction of home loan interest up to Rs 2,00,000. With rising interest rates and inflation, there's a call to increase this limit to Rs 3,00,000. This proposed change aims to provide greater tax relief to homeowners, addressing the growing costs of home ownership in the current economic environment.

Currently, Section 80TTA of the Income Tax Act allows individuals and Hindu Undivided Families (HUFs) to claim a deduction of up to Rs 10,000 annually on interest earned from savings accounts in banks, co-operative societies, and post offices. However, there's a growing call to expand this provision's scope. Proposals suggest extending the deduction to include interest from term deposits, recurring deposits, and other similar instruments in banks and post offices.

Read more about the expectations of small savers here

As the Union budget approaches, investors in cryptocurrency assets are hoping for several key changes. These include a reduction in the transaction tax, allowing setting-off of losses and treating capital gains from crypto assets the same as in other income sources. These potential changes, if implemented, could significantly impact the cryptocurrency investment landscape in India.

The Association of Mutual Funds in India (AMFI) suggests that long-term capital gains on listed shares or units of equity-oriented fund schemes held for over one year and up to three years should be subjected to tax at the rate of 10 percent on capital gains exceeding Rs 2 lakh in a financial year. Additionally, AMFI proposes that gains from these same assets, when held for more than three years, should be exempted from capital gains tax.

Read more about AMFI's suggestions on Union Budget here

The interim budget presented in February offered no tax relief to citizens. Finance Minister Nirmala Sitharaman maintained the status quo, leaving tax rates and slabs unaltered in both the new and old tax systems.

Here's what the current structure looks like:

The current capital gains tax structure in India is complex, with rates varying from 10 to 30 percent based on the holding period, which ranges from one to three years. Financial experts are calling for a rationalisation and standardisation of this regime to streamline the holding period, uniformity in long-term/short-term rates across asset classes, and a change in the base year for indexation for long-term capital gains. There's particular interest in simplifying the capital gains tax structure for domestic equities and mutual funds by establishing a uniform holding period.

1. An increase in tax deduction limit on home loan interest under Section 24(b) of the Income-Tax Act
2. The reintroduction of Section 80EEA
3. New tax incentives to promote affordable housingRead more about it, here

As the Budget approaches, speculation grows about a potential increase in the standard deduction limit for salaried individuals. Reintroduced in Budget 2018 at Rs 40,000 per year, replacing two earlier deductions -- travel allowance (Rs 19,200) and medical deduction (Rs 15,000), it was later raised to Rs 50,000 in the 2019 interim budget. However, given that the combined total of replaced deductions totalled Rs 34,200, the current Rs 50,000 limit offers only modest additional tax savings to taxpayers. Consequently, there's persistent demand for a higher limit. Some experts anticipate the Finance Minister might consider elevating the standard deduction to as much as Rs 1 lakh per annum in the upcoming budget.

As the Union Budget nears, there's growing interest in a possible increase to health insurance premium deductions under Section 80D of the Income Tax Act, 1961. The current limit of Rs 25,000 was last increased from Rs 15,000 in Budget 2015, with no changes since then. After nine years without an adjustment, many are hopeful for an update to reflect rising healthcare costs.

While the interim Budget in February offered no tax sops, elderly taxpayers and financial experts are optimistic about potential concessions in the upcoming full Budget on July 23. This anticipation is heightened by the state assembly elections scheduled for November.

As the Union Budget approaches, there's growing anticipation for potential changes to income tax exemption limits. Currently, the basic exemption threshold stands at Rs 2.5 lakh under the old tax regime and Rs 3 lakh under the new regime. The expectation is that the government will raise the exemption limit under the new tax regime to Rs 5 lakh

Following the interim Budget 2024's lack of tax relief announcements, individual taxpayers are now looking forward to the full-year Budget scheduled today. Their expectations include reduced tax rates, a higher basic exemption limit, and increased standard deduction.