By Ravi Garg
Finance Minister Nirmala Sitharaman presented her 1st budget of Modi 3.0 government on 23rd July 2024. Tax reforms introduced by the Finance Minister are not up to the expectations of taxpayers. Taxpayers were expecting increase in deduction like 80C, 80D, etc., but there is no mention of this in the budget presented by the FM. Tax reforms introduced by the Finance Minister which will impact your income tax for the financial year 2024-25 are as follows:
- Change in Income Tax Slab Rates– There is no change in slab rates under the old tax regime. The Government wants to promote the new tax regime therefore the Income Tax Slab rates under New Tax Regime have been changed which are as follows:
– Up to Rs 3,00,000: Nil
– From Rs 3,00,001 to Rs 7,00,000: 5%
– From Rs 7,00,001 to Rs 10,00,000: 10%
– From Rs 10,00,001 to Rs 12,00,000: 15%
– From Rs. 12,00,001 to Rs. 15,00,000: 20%
– Above Rs 15,00,000: 30%.
Suppose your income is Rs 10,00,000 then tax as per revised slab rates will be Rs 50,000 plus cess against the earlier tax of Rs 60,000 plus cess.
Although Government wants to promote the new tax regime, but it is somehow discouraging taxpayers to invest their money in long term schemes like PPF, long term FDR, LIC, etc.
- Increase in Standard Deduction from Rs 50,000 to Rs 75,000.
There is good news coming in this budget for salaried taxpayers. Those salaried class who are paying tax as per new tax regime will get higher standard deduction of Rs 75,000. Earlier, the amount of deduction was Rs 50,000. For taxpayers under Old Tax Regime, the old standard deduction of Rs 50,000 will continue to apply.
- Increase in exemption from the income of Family pension from Rs 15000 to Rs 25,000.
Those taxpayers who are getting family pension on account of death of their family member are taxed under the head other sources and not under the head salaries. Earlier, there was an exemption of Rs 15,000 from family pension income, now the exemption has been increased to Rs 25,000. The question is why the exemption from family pension is not equal to standard deduction of salaries which is now Rs 75,000?
- Bonanza for Investors and Start ups
The government has proposed to abolish angel tax for all class of investors to give a boost to start ups. The long awaited reform announced by the FM is set to enhance the startup funding from both domestic and international sources.
- Increased Tax rates of Rs 20% on Short Term Capital Gain and 12.5% on Long Term Capital Gains.
It is a big blow to stock market investors as the FM has increase the tax rates on Short Term Capital Gains from 15% to 20% and on LTCG from 10% to 12.5%. It is pertinent to note that a few years ago, the long term capital gain was exempt from income tax to promote people to enter stock market but now when almost every second individual is in the stock market, the government is increasing tax on them year by year. When the FM announced this news, the Sensex crashed 800 points, however it recovered later on.
- Tax rates on sale of property has decreased from 20% to 12.5% but the benefit of indexation is gone.
In a surprising amendment made by the FM, tax on the real estate transactions, i.e. sale of immovable properties has decreased from 20% to 12.5%, but the benefit of indexation is removed. It will help to curb the black money involved in the real estate transactions. Further indexation benefit is still available on those properties purchased before 2001. Clarification is required from the FM on how it will be applied for inherited properties.
Although the government has provided some sort of benefits to the taxpayer, these are not sufficient to slow down the burden of tax on middle class taxpayers. Rate of Surcharge is still very high on people whose income is more than Rs 50 Lakh a year. No changes have been introduced on taxation of Interest on FDR income despite the demand raised by State Bank of India.
Government should focus on increasing the number of taxpayers paying income tax. For now, government is taking higher taxes from those who are earning more, and their burden of tax is increasing year on year.
Secondly, after paying income tax, people are spending money in the market and again paying GST to the government.
For now, the situation is – if you are earning money- pay tax; if you are spending money – pay tax; if you are saving money – pay tax.
(Ravi Garg is an associate Chartered Accountant, who has completed his CA at the age pf 21 years.)
