Income Tax Rules: Taxpayers should know these 5 key changes from the last 6 months that were introduced in Budget 2024

Union Budget: Next week on February 1, 2025, the Budget 2025 is scheduled to be presented. In 2024, two budgets were presented due to it being an election year: an interim budget in February and a full budget in July. 

The previous budget in July 2024, introduced changes under the new tax regime during the first term of the Modi 3.0 regime, including revised tax slabs and an increased standard deduction. Anticipation is high for the upcoming budget, with hopes for more taxpayer-friendly reforms such as potential adjustments to income tax slabs, capital gains tax, and benefits for salaried individuals.

Some key changes were announced for taxpayers under the new tax regime in the last budget. 

1. Updated Tax Slabs under New Tax Regime

The tax brackets have been revised in the latest tax structure to provide taxpayers with greater financial relief.

• Income between Rs 0-3 lakh: 0% tax
• Income between Rs 3-6 lakh: 5%
• Income between Rs 6-9 lakh: 10%
• Income between Rs 9-12 lakh: 15%
• Income between Rs 12-15 lakh: 20%
• Income of Rs 15 lakh and above: 30%
• These revised slabs aim to assist middle-income earners in potentially saving up to Rs 17,500.

2. Standard Deduction Increase for New Tax Regime

The standard deduction limit has been raised from Rs 50,000 to Rs 75,000.

Additionally, the limit for family pensioners has been increased from Rs 15,000 to Rs 25,000.

This adjustment will offer tax relief to both employed individuals and retirees.

3. Increase in deduction limit for NPS contributions under New Tax Regime

The deduction limit for an employer's contribution to the National Pension System (NPS) has been raised from 10% to 14%. This modification is expected to encourage employees to increase their retirement savings.

4. Revisions to Capital Gains Tax

The tax rate for short-term capital gains (STCG) has been raised from 15% to 20%, while the tax rate for long-term capital gains (LTCG) has been increased from 10% to 12.5%. Additionally, the LTCG exemption limit on equity investments has been raised from Rs 1 lakh to Rs 1.25 lakh. These modifications are intended to incentivize investors to focus on long-term investments.

5. Introduction of TCS on Luxury Goods

Tax Collection at Source (TCS) has been implemented on luxury goods valued at over Rs 10 lakh, effective as of January 1, 2025. This measure is intended to enhance monitoring of high-value transactions and curb tax evasion.

Impact of new tax rules

The implementation of new tax rules will provide relief to the middle-income group by adjusting tax slabs and standard deductions, thus increasing disposable income for this demographic.
The government is promoting the new tax regime by making it more appealing to the general public, encouraging greater adoption of the system.
Changes in investment patterns are expected as more exemptions on long-term capital gains will likely lead individuals to prioritize long-term investments.
High-value transactions will be closely monitored by imposing TCS on luxury goods, allowing the government to keep a watchful eye on significant financial activities.