BUDGET PROPOSAL: DETAILED IMPACT ON INDIVIDUAL TAXATION

The latest budget proposal has introduced several significant changes aimed at providing tax relief and simplifying the tax structure for individual taxpayers. Here’s a detailed breakdown of the key changes and how they might impact you:

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?New Income Tax Slabs

The new tax regime introduces revised income tax slabs, offering substantial relief to taxpayers. Here are the updated slabs:

- Income up to ?3,00,000: No tax

- Income from ?3,00,001 to ?7,00,000: 5% tax

- Income from ?7,00,001 to ?10,00,000: 10% tax

- Income from ?10,00,001 to ?12,00,000: 15% tax

- Income from ?12,00,001 to ?15,00,000: 20% tax

- Income above ?15,00,000: 30% tax

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These new slabs are designed to reduce the tax burden on individuals, particularly those in the lower and middle-income brackets. By increasing the income threshold for each slab, more people will fall into lower tax brackets, leading to overall savings.

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?Increased Standard Deduction

The standard deduction for salaried individuals and pensioners has been increased from ?50,000 to ?75,000. This means more of your income is tax-free, reducing your overall taxable income. For example, if your salary is ?10,00,000 per year, the standard deduction increase will save you an additional ?25,000 in taxable income, resulting in lower taxes.

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?Enhanced Family Pension Deduction

The deduction for family pension has been raised from ?15,000 to ?25,000. This provides additional relief for individuals receiving a family pension, further reducing their taxable income. For instance, if you receive a family pension of ?1,00,000 per year, the increased deduction will save you ?10,000 in taxable income.

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?New Pension Scheme Contributions

For employees contributing to the New Pension Scheme (NPS), there’s good news:

- Employers' Deduction: The allowable deduction for employers' contributions has increased from 10% to 14% of the employee's salary. This encourages employers to contribute more towards employees' pension schemes.

- Employees' Deduction: Non-government employees can now deduct up to 14% of their salary for pension contributions, up from the previous limit of 10%. For example, if your salary is ?12,00,000, you can now contribute ?1,68,000 to the NPS, which is ?48,000 more than the previous limit, leading to greater tax savings.

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?Simplified Capital Gains Taxation

The taxation of capital gains has been streamlined and simplified:

- Short-term Capital Gains: On specified financial assets, these will now be taxed at 20% instead of 15%. This change aims to equalize the tax rates across different types of assets and make the system fairer.

- Long-term Capital Gains: All financial and non-financial assets will be taxed at 12.5%, simplifying the long-term capital gains tax rates and making it easier for taxpayers to understand their liabilities.

- Exemption Limit Increased: The exemption limit for capital gains on certain listed financial assets has been increased from ?1 lakh to ?1.25 lakh per year. This change will benefit small investors by allowing them to realize more gains without paying tax.

- Classification of Assets: Listed financial assets held for more than a year will be classified as long-term, while unlisted financial assets and all non-financial assets must be held for at least two years. This change aligns the holding periods for tax classification and simplifies the rules for investors.

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?Reduced TDS Rates

Several TDS rates have been reduced, which means less tax will be deducted at source on certain types of income, putting more money in your pocket immediately:

- Insurance Commission (Section 194D): Reduced from 5% to 2% (effective from 1st April 2025)

- Life Insurance Policy (Section 194DA): Reduced from 5% to 2% (effective from 1st October 2024)

- Commission on Lottery Tickets (Section 194G): Reduced from 5% to 2% (effective from 1st October 2024)

- Commission or Brokerage (Section 194H): Reduced from 5% to 2% (effective from 1st October 2024)

- Rent by Individual or HUF (Section 194-IB): Reduced from 5% to 2% (effective from 1st October 2024)

- Certain Payments by Individuals or HUF (Section 194M): Reduced from 5% to 2% (effective from 1st October 2024)

- Payments by E-commerce Operator (Section 194-O): Reduced from 1% to 0.1% (effective from 1st October 2024)

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These reductions mean that if you earn income through these channels, you will see less tax deducted at source, improving your cash flow.

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?Additional Benefits

- Credit for Tax Collected at Source (TCS): It is now allowed while computing the tax to be deducted on salary income, simplifying the process and ensuring that taxpayers get full credit for taxes already paid.

- Credit for TCS of Minors: Rules will be provided to claim credit of TCS in the hands of the parent. This change will help families better manage their tax liabilities by allowing parents to claim TCS credits on behalf of their minor children.

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These proposals collectively aim to ease the tax burden on individuals, simplify the tax process, and encourage savings and investments. The new measures, especially the revised tax slabs and increased standard deductions, are expected to benefit a large section of the population, making tax compliance simpler and more rewarding.