Budget 2024 - What’s in it for the common man?

The Hon. Finance Minister presented her first union budget of the newly formed Government amid the heightened expectations from various stakeholders, especially individuals and salaried employees.

The budget did have many changes and some of the key proposals from an individual tax perspective are discussed below:

With the on-going focus of the government on the new tax regime, following changes in the slab rate has been proposed:

The proposed change will provide a tax benefit up to a maximum of INR 10,000 (excluding surcharge and education cess) to the taxpayers.

Currently the limit for standard deduction is INR 50,000 under both old and the new tax regime. An enhanced limit of INR 75,000 is proposed under the new tax regime only providing an additional tax benefit up to a maximum of INR 7,500 (excluding surcharge and education cess) to the taxpayers.

It has been proposed to increase the deduction available towards family pension from the existing limit of INR 15,000 to INR 25,000, thereby providing a maximum benefit of INR 3,000 (excluding surcharge and education cess) to the taxpayers.

Currently, a Central or State Government employee is eligible for deduction up to 14% of specified salary in respect of employer contribution towards NPS under both old and new tax regime.

Comparatively, private sector employees are eligible to claim such deduction only up to 10% of specified salary. To bring parity, as a welcome move the said limit is proposed to be enhanced to 14% of specified salary under the new tax regime only for even private sector employee.

To simplify taxation of capital gains, following changes have been proposed effective 23 July 2024:

• Only two holding periods i.e., 12 months and 24 months to determine whether it is a short-term or long-term capital asset.
• The tax rate for specified class of assets qualifying as Short-Term Capital Gains (STCG) will be 20% and Long-Term Capital Gains (LTCG) will be 12.5%. Additionally, indexation benefit on LTCG has been abolished.
• The exemption towards LTCG from sale of specified securities has been increased from INR 1 lakh to INR 1.25 lakh. 

There are definitely significant changes in capital gains taxation which may enhance the tax bill for certain category of investors, however the focus is aligned to the theme of simplifying taxes and ease of compliance. The Honorable FM has made an attempt to provide tax relief to the common man opting for the new tax regime.

A version of this article was published by The Financial Express Online on 26 July 2024. The same can be read here