Here’s a detailed overview of the key modifications:
Revised income tax slabs
The Finance Minister has increased the lowest slab in the new tax regime to ₹3 lakh, up from ₹2.5 lakh.
This adjustment means that individuals with an annual income up to ₹3 lakh will not have to pay any income tax.
The revised tax slabs are as follows:
₹3 lakh to ₹7 lakh: 5% tax
₹7 lakh to ₹10 lakh: 10% tax
₹10 lakh to ₹12 lakh: 15% tax
₹12 lakh to ₹15 lakh: 20% tax
Enhanced standard deduction
The standard deduction has been hiked from ₹50,000 to ₹75,000.
This increase will allow salaried employees to save an additional ₹17,500 in income tax.
The standard deduction reduces the taxable income without requiring receipts or proofs of expenses, thereby lowering the overall tax liability.
Increased tax deductions for family pension
The tax deduction for family pension has been raised from ₹15,000 to ₹25,000.
This change aims to improve post-retirement financial stability for individuals receiving a family pension.
Adjustments in capital gains tax
The tax rate for short-term capital gains (STCG) on equity investments held for less than one year has been increased from 15% to 20%.
Additionally, the long-term capital gains (LTCG) tax rate on shares held for over a year has been raised from 10% to 12.5%.
The tax on equity derivatives transactions has been revised to 0.02% and 0.01%, and income from share buybacks will now be taxed in the hands of recipients.
Gold capital gains tax changes
The holding period for gold to qualify as long-term capital gains has been reduced from 36 months to 24 months.
The LTCG tax rate on gold has been cut to 12.5%, but the benefit of indexation, which adjusted the purchase price for inflation, has been removed.
Increased NPS deduction
The deduction for employers’ contributions to the National Pension System (NPS) has been increased from 10% to 14% of employees’ basic salary.
This enhancement extends to both public and private sector employees under the new tax regime.
Removal of indexation benefit on property sales
The indexation benefit on the sale of property has been removed.
Previously, long-term capital gains from property sales were taxed at 20% with indexation.
The new rate of 12.5% will now apply without the indexation benefit.
TDS rate changes
Rent payments: TDS on rent under Section 194-IB has been reduced from 5% to 2%, effective from October 1, 2024.
Life insurance payouts: TDS on life insurance policy payouts under Section 194DA has been similarly reduced from 5% to 2%, starting October 1, 2024.
General TDS adjustments: The 5% TDS rate on many payments will be merged into a 2% rate, and the 20% TDS rate on mutual fund or UTI repurchases is being withdrawn.
The TDS rate on e-commerce operators is proposed to be reduced from 1% to 0.1%.