New income tax regime gets sweeter; tax slabs softened, standard deduction hiked

The most significant impact is on trading costs, which have risen substantially due to an increase in the Securities Transaction Tax (STT) on F&O securities

Budget 2024 has brought about minor tweaks to your income tax rates. And in keeping with the tradition of Narendra-Modi led National Democratic Alliance (NDA) government, only those who have opted for the new income-tax regime stands to benefit. Here are the big money changes that will affect your wallet.

Income tax slabs

The income-tax slabs have slightly changed the tax slabs at the lower end. To be sure these changes have happened only in the new income tax regime. The old tax regime remains unchanged.

Standard deduction

In addition, the finance minister Nirmala Sitharaman has hiked the standard deduction to Rs 75,000, up from Rs 50,000 earlier. Again, this is available only for those who opt for the new income-tax regime.

A standard deduction is a flat deduction available to all salaried taxpayers and pensioners, irrespective of your income and the slab to which you belong.

Capital gains threshold standardised

For the purpose of simplifying capital gains, Sitharaman has standardised the short-term capital gains (STCG) tax and long-term capital gains (LTCG) rates across all financial and non-financial assets, unless separately specified.

If you hold listed financial assets for less than 1 year, it will be classified as short-term, and long-term beyond 1 year. But all unlisted and non-financial assets will attract LTCG tax only if you hold them beyond two years.

Capital gains tax rate hiked

Additionally, LTCG tax for all financial and non-financial assets has been standardised to 12.5 percent (up from 10 percent for equities, for instance). To compensate the hike in LTCG tax rate, the equity gains that you accrue will now be exempt up to Rs 1.25 lakh, up from Rs 1 lakh earlier.

The tax status on debt mutual fund schemes (no indexation and LTCG benefits) continue. However, Budget 2024 has added unlisted bonds and debentures to this list now.

Relief for MNC employees with ESOPs, foreign assets

Individuals employed with multinational companies who have received ESOPs or hold bank or pension assets abroad will not attract penalty for non-disclosure of these assets, provided their value does not exceed Rs 20 lakh. At present, non-disclosure of even low-value holdings attracted the provisions of the Black Money Act, which prescribed a penalty of Rs 10 lakh.

Support through Employees’ Provident Fund for fresh employees

To support the growth of jobs in all sectors, especially the private sector, finance minister Sitharaman announced a 4-step approach. Most of these measures aim to reward employers for creating jobs. But one measure will put some money directly in the employee's hands.

She said that if you are entering the workforce for the first time, and if your salary is below Rs 1 lakh a month, then the government will pay you an incentive of Rs 15,000. This would directly be paid to the employee's bank account and in three instalments. This scheme will be valid for two years. If the employee leaves before one year, the employer has to refund this subsidy too the government.