Honourable Finance Minister Smt. Nirmala Sitharaman announced her 7th straight Union Budget on July 23, 2024. In the budget, she offered some relief to salaried individuals by raising the standard deduction to Rs. 75,000 (applicable only to those who follow the new tax regime). Additionally, she adjusted the capital gains tax rates and the tax slabs with the intention of lowering the overall income tax liability.

In this article, let’s gain more clarity and understand the 5 major Union Budget 2024 changes that you must know to remain compliant and better manage your taxes.

• The latest Union Budget 2024 changes have revised the income tax slab rates applicable under the new tax regime.
• The holding period for equity investments has been reduced from 24 months to 12 months, and similarly, for other assets, it has been reduced from 36 months to 24 months.
• Now, long-term capital gains are taxed at 12.5%, and short-term gains on equity-related investments are taxed at 20%.
• The standard deduction for salaried individuals has been increased from Rs. 50,000 to Rs. 75,000.

One of the most significant Union Budget 2024 changes is the revision of tax slab rates under the new regime. With a basic exemption limit of Rs. 3,00,000, the income tax rates start from 5% and go all the way up to 30%. Let’s check them out:

As per the government, this revision of rates reduces the overall income tax liability and enhances disposable income. Additionally, taxpayers with a taxable income up to Rs. 7,00,000 are also allowed a maximum rebate of Rs. 25,000 under Section 87A.

In the Union Budget 2024, the government has also simplified the taxation of capital gains. For the unaware, capital gains arise when you sell a capital asset for a profit. This profit is taxed under the Income Tax Act based on its type (listed or unlisted) and asset holding period (short-term or long-term). Let’s understand in detail:

• Changes in holding period
  As per the latest Union Budget 2024 changes, “listed financial assets” (such as equity shares and equity-oriented mutual funds) are considered long-term if held for more than one year. For “unlisted financial assets" and non-financial assets like real estate, they must be held for at least two years to qualify as long-term.
• Short-term capital gains (STCG)
  STCG arising from the sale of equity-related investments will be taxed at a 20% tax rate. However, for all other types of financial and non-financial assets (such as debt mutual funds and unlisted debentures), STCG will be taxed at the applicable slab rates.
• Long-term capital gains (LTCG)
  Long-term capital gains for all types of assets are taxed at 12.5%. For equity-related investments, the exemption limit for capital gains is set at Rs. 1.25 lakh per year. Be aware that only the amount exceeding this threshold will be taxed at 12.5%.
  However, the benefit of indexation has been removed. Now, taxpayers cannot adjust the purchase price of their capital assets for inflation.
• Tax on unlisted bonds and debentures
  Unlisted bonds, debt mutual funds, and market-linked debentures will be taxed as per the applicable slab rates, irrespective of their holding period.

The standard deduction is a fixed amount that is subtracted from the income computed under the head salary. This deduction has been increased from Rs. 50,000 to Rs. 75,000. As a result, more of your income will be tax-free, which will lower your income tax liability and enhance your TDS refunds.

As per the latest Union Budget 2024 changes, the government has increased the Securities Transaction Tax (STT). For the unaware, it is a tax you pay when buying or selling securities. In the futures and options (F&O) market, the STT for selling options has been raised from 0.0625% to 0.1% of the option premium. This means traders will now pay more tax when selling options.

On the other hand, when selling futures, the STT has gone up from 0.0125% to 0.02% of the futures’ trading price. This increase will also lead to higher costs for traders in the futures market.

The government has introduced an 'Employment Linked Incentive scheme' to support individuals who are starting their first job. Under this scheme, the government will pay the first month’s salary of these new workers as a form of financial aid. This payment will be up to Rs. 15,000 and will be distributed in three instalments. A direct benefit transfer (DBT) will be made to the individual’s bank account.

The idea behind this initiative is to encourage employment and provide some immediate financial relief to those entering the workforce for the first time.