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New Capital Gains Tax Regime In Budget 2024: All…

25 July 2024
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New Delhi: The Central Board of Direct Taxes (CBDT) on Thursday issued FAQs to explain the new capital gains tax regime in Budget 2024-25.

Q: What are the major changes brought about in the taxation of capital gains by the Union Budget 2024-25?

A: The taxation of capital gains has been rationalised and simplified. The five broad parameters to this rationalisation and simplification are: Holding period has been simplified. There are only two holding periods now, viz. one year and two years. Second, rates have been rationalised and made uniform for the majority of assets. Third, indexation has been done away with for ease of computation with simultaneous reduction of rate from 20 per cent to 12.5 per cent. Fourth, parity between Resident and Non-resident and fifth there is no change in roll over benefits.

Q: What is the date when the new taxation provisions come into force?

A: The new provisions for taxation of capital gains came into force from 23.7.2024 and shall apply to any transfer made on or after this date.

Q: How has the holding period been simplified?

A: Earlier there were three holding periods for considering an asset to be a long-term capital asset. Now the holding period has been simplified. There are only two holding periods, for listed securities, it is one year, for all other assets, it is two years.

Q: Who will benefit from the change in holding period?

A: The holding period of all listed assets will now be one year. Therefore, for listed units of business trusts (ReITs, InVITs) holding period is reduced from 36 months to 12 months. The holding period of gold, unlisted securities (other than unlisted shares) is also reduced from 36 months to 24 months.

Q: What about the holding period of immovable property and unlisted shares?

A: The holding period of immovable property and unlisted shares remains the same as earlier i.e. 24 months.

Q: What are the changes in the rate structure for STT paid capital assets?

A: Rate for short-term STT paid listed equity and equity oriented mutual fund and units of business trust (Section 111A) has increased from 15 to 20 per cent. Similarly the rate for these assets for long-term (S. 112A) has increased from 10 to 12.5 per cent.

Q: Is there any change in the exemption limit for long-term capital gains under Section 112A which was earlier Rs 1 lakh?

A: Yes. The exemption limit of Rs 1 lakh for LTCG on these assets has also increased to Rs 1.25 lakh. This increased exemption limit will apply for FY 2024-25 and subsequent years.

Q: What are the changes in the rate structure for other long-term capital gains?

A: The rate for other long-term capital gains on all assets has been rationalised to 12.5 per cent without indexation (Section 112). This rate was earlier 20 per cent with indexation. This will aid in simplifying the taxation of capital gains and their easy computation.

Q: Who will benefit by the change in rate from 20 per cent (with indexation) to 12.5 per cent (without indexation)?

A: The reduction in the rate will benefit all categories of assets. In most of the cases, the taxpayers will benefit substantially. But where the gain is limited vis-a vis inflation, the benefit will also be limited or absent in a few cases.

Q: Can the tax payer continue to avail the roll over benefits on capital gains?

A: Yes. The rollover benefits remain the same as earlier. There is no change in roll over benefits already available under the IT Act. Therefore, tax payers who want to save on LTCG tax even with low rates can continue to avail the rollover benefits on fulfillment of conditions as applicable.

Q: In which assets, can the long-term capital gains be invested for rollover benefits?

A: For rollover benefits, tax payers can invest their gains in house under Section 54 or Section 54F or in certain bonds under Section 54EC. For complete details of all rollover benefits, please refer to Sections 54, 54B, 54D, 54EC 54F, 54G of the IT Act.

Q: What is the amount up to which rollover benefit is available?

A: Investment of capital gain in 54EC bonds (up to Rs. 50 lakh) and in other cases, the capital gain is exempt from tax, subject to certain specified conditions.

Science & Environment

Income Tax Expectations Budget 2024: What are the ideal…

21 July 2024
by admin

Income Tax Expectations Budget 2024: The Narendra Modi government has been pushing for the adoption of the new income tax regime that offers concessional income tax rates, but with negligible exemptions. The new income tax regime was first introduced in 2020 and in the 2023 Budget further tweaks were made to popularise it amongst the common man and middle class salaried taxpayers.Further, the new income tax regime was made the default regime, signalling the government’s intent to push for it as the main tax regime.
Finance Minister Nirmala Sitharaman will present the first Budget 2024 of the Modi 3.0 government on July 23, 2024. Expectations are high that more changes may be brought in the new income tax regime – possibly raising the basic exemption limit, hiking standard deduction, or/and rationalising the income tax slabs and tax rates further.
Also Check | Budget 2024 Expectations Live Updates: Income Tax changes, record capex for roads and railways expected from FM Nirmala Sitharaman
So what can salaried taxpayers expect from Budget 2024 for the new income tax regime? Times of India Online did an exclusive survey of top personal tax experts. Here’s what they had to say:

What Should Be The Ideal Tax Slabs, Rates Under New Income Tax Regime?

Tax experts are divided on the ideal tax income tax slabs and income tax rates under the new tax regime. However, most agree that the 30% tax slab above an income of Rs 15 lakh is still steep and needs to be implemented at incomes of at least above Rs 20 lakh.
Aarti Raote, Partner, Deloitte India says that the government may not look at rejigging the tax rates up to 25% slab under the new tax regime. Rather, the government may look to increase the threshold of Rs 15 lakh to Rs 20 lakh for the 30% tax rate under the new tax regime.
“In addition, the basic exemption limit of Rs 3 lakh can be moved to Rs 5 lakh. Additionally, increasing the standard deduction to Rs 1 lakh from existing levels of Rs 50,000 would provide further relief and encourage compliance,” she tells TOI.
Chander Talreja, Partner, Vialto Partners tells TOI, “This year, the government may provide relief to middle income level individuals by tweaking the slab rates further and introducing additional slabs for income ranging between Rs 15 lakh and Rs 20 lakh.” Chander recommends the following income tax slabs and rates for salaried taxpayers under the new income tax regime:

Income range (Rs)		Tax rate
Up to	3,00,000	NIL
3,00,001	6,00,000	5%
6,00,001	9,00,000	10%
9,00,001	12,00,000	15%
12,00,001	15,00,000	20%
15,00,001	20,00,000	25%
20,00,001	above	30%

Preeti Sharma, Partner, Tax & Regulatory Services, BDO India LLP says that the applicable tax rate of 30% on the income of Rs 15 lakh is a very steep increase from 5% at the income level of Rs 3 lakh. “The applicable tax rate on income of Rs 15 lakh should be reduced to 22-25% and another slab may be introduced raising the tax rate to maximum 30% for income level of Rs 25 lakh and above,” Preeti tells TOI.
Also Read | Budget 2024 income tax expectations: Raise basic exemption limit, standard deduction and NPS benefits for taxpayers
“This reduction in tax will leave the government with some loss in the collection of direct tax revenue, at the same time leaving the individuals with more disposable income in their hands. This would also lead to more spending in the economy which will bring more indirect tax collection for the government,” she adds.
However, Surabhi Marwah, Tax Partner, EY India is of the view that the current slabs are fine but the basic exemption should be raised to Rs 5 lakh. She also advocates reducing the income tax rates in order to provide more disposable income in the hands of taxpayers.
Kuldip Kumar, Partner at Mainstay Tax Advisors says that the number of slabs should be brought down under the new regime. “Currently there are 7 tax slabs under the new regime. These need to be rationalized to 3 or 4 at the most. The government has all the data on income brackets and the respective number of taxpayers falling therein and taxes paid. Changes should be made in such a way that tax burden reduces on the lower and middle income group tax payers,” he tells TOI.

New Income Tax Regime: What Are the Current Income Tax Slabs?

There were significant changes introduced in personal tax for individuals opting for new personal tax regime in the Budget 2023 like surcharge rate was brought down from 37% to 25% for individuals having taxable income more than Rs 5 crores, raising of the basic exemption limit by Rs 50,000, 100% tax rebate on income up to Rs 7 lakh. Accordingly, the government provided benefits for low-income level as well as high income level individuals.
Currently, the income tax rates and slabs for the new income tax regime are:

Income range (in INR)	Rates
Up to 300,000	Nil
300,001 to 600,000	5%
600,001 to 900,000	10%
900,001 to 1200,000	15%
1,200,001 to 1,500,000	20%
Above 1,500,000	30%

The eligibility limit for rebate is Rs 7 lakh, which means a tax rebate of up to Rs 25,000. There is a marginal relief for individuals whose net taxable income exceeds Rs 7 lakh and the incremental income tax liability is higher than incremental income above Rs 7 lakh.
Also Read | Income Tax Expectations Budget 2024: What can the salaried, individual taxpayers expect? Top points
A surcharge is levied on the income tax if total income exceeds Rs 50 lakh. The rates of surcharge are:

Income (in INR)	Surcharge Rates under regular/ old tax regime	Surcharge Rates under New Tax Regime
Above 5,000,000 but less than 10,000,000	10%	10%
Above 10,000,000 but less than 20,000,000	15%	15%
Above 20,000,000 but less than 50,000,000	25%	25%
Above 50,000,000	37%	25%

Science & Environment

Budget 2024 income tax expectations: Raise basic exemption limit,…

19 July 2024
by admin

By Ratna K
Budget 2024 income tax expectations: With the government’s 3.0 Budget round the corner, taxpayers are optimistic that the finance minister will introduce measures aimed at revitalizing the economy and alleviate the financial burden on individuals. Expectations are particularly high for policies that can stimulate growth while ensuring equitable distribution of benefits, and impact positively every household and business in the country.
Foremost among the anticipated reforms is the rationalization of the basic exemption limit under the simplified and old tax regimes.Currently, the limit is set at Rs 3 lakhs and 2.5 lakhs respectively, leading to confusion amongst taxpayers. It is therefore suggested for a uniform increase of the basic exemption limit to Rs 5 lakhs under both the tax regimes. This measure aims to reduce compliance burden on the taxpayers while giving them greater financial flexibility.
With the new tax regime made a default regime effective 1 April 2023, it has gained popularity among taxpayers at large, due to its additional benefits to different income groups. For example, resident taxpayers with income below Rs 7 Lakhs and high net-worth individual taxpayers earning above Rs 5 crores are benefitted with nil and reduced tax liability respectively. However, middle-income taxpayers have to choose between the regimes due to common exemptions like HRA, LTA and Chapter VI-A deductions. To further enhance attractiveness of simplified tax regime, there is the expectation to tweak the tax slab rates by increasing the 30% tax slab limit from Rs 15 lakhs to Rs 20 lakhs. Additionally, there is anticipation to enhance the standard deduction and the deduction for NPS contributions to Rs 1 lakh from Rs 50,000.
Also Read | Income Tax Expectations Budget 2024: What can the salaried, individual taxpayers expect? Top points
Off late, many taxpayers have chosen NPS owing to its market linked returns and tax-savings advantages besides being a retirement funding plan. Currently, central government employees enjoy a deduction of up to 14% of salary while private sector employees enjoy only up to 10%. Similar to the parity brought in for the leave encashment and gratuity deductions to both the sets of employees, extending the NPS deduction limit of 14% for private sector employees also, would level the playing field for all.
While there are taxpayers who are looking for further benefits under the new tax regime, those who continue to remain under the old tax regime are also anticipating reforms. With concerns on rising health costs and property costs since the pandemic, there is a growing cause to enhance deductions under section 80C to Rs 2.5 lakhs, under section 80CCD(1B) for NPS to Rs 1 lakh, for home loan interest to Rs 3 lakhs and for Mediclaim premium to Rs 1 lakh. In addition, it is recommended to increase the limit under section 80TTA of Rs 10,000 to Rs 50,000 and to include interest from all types of deposits along with interest from savings bank account under its ambit. This move is aimed at reducing tax burden and promoting tax saving and small scheme investments.
Senior citizens have also been urging for reforms that directly benefit them. They seek the extension of deductions under section 80TTB to cover interest income from small saving schemes, particularly post-office schemes, providing them fixed incomes. They also seek rationalization of lock-in periods for tax saving investments to facilitate funding medical emergencies and to rationalize tax burden on passive incomes such as rent, dividends, capital gains. This is essential for securing their financial stability amidst escalating living costs.
Also Read | Budget 2024 income tax expectations: Are you paying excess tax? You may be paying Rs 43,226 extra on Rs 10 lakh income – find out why
Further to the above, anticipation is high with regard to bolstering green energy initiatives from electric vehicles to installation of solar-related installations in homes. This initiative is in line with the government’s dedication to fostering renewable energy sources as seen in the interim budget released in February 2024, promoting the electric vehicle (EV) ecosystem through development of more charging stations. In this context, another recommendation is to introduce specific perquisite valuation mechanism and rules for usage of hybrid and electric cars besides announcing sops towards adoption of solar-powered equipment.
As the countdown to the Budget intensifies, stakeholders nationwide are eagerly awaiting these potential reforms. The reform expectations reflect a strategic approach towards balancing economic growth with individual financial empowerment, setting the stage for a Budget that could redefine the landscape of personal taxation in India besides catering to the overall welfare of taxpayers across the country.
(The author is Ratna K, Executive Director, DHS LLP. Ankit Agarwal, Associate Director, DHS LLP and Amritha S, Assistant Manager, DHS LLP contributed to the article)

Science & Environment

Budget 2024 income tax expectations: Why new tax regime…

13 July 2024
by admin

By Tanu Gupta
Budget 2024 income tax expectations: Increase in the limits of various exemptions and deductions is one of the prime expectations of the individual taxpayers from any Union Budget. But with the current government’s focus on a simplified tax regime with minimal exemptions and deductions, do the taxpayers need to adjust their old-time favorite expectation ? Should the taxpayer expect tax reliefs in the New Tax Regime instead ? Either way, the individual taxpayers have high hopes from this Budget, especially in the absence of any tax proposals announced in the interim budget in Feb 2024.
In this article, I list some of the expectations of individual taxpayers from the Union Budget 2024 to be presented on 23 July 2024.
Popularizing the New and Simplified Personal Tax Regime
A New Personal Tax Regime was introduced in Budget 2020 which was simple, in the sense that it allowed for very limited exemptions and deductions. To increase the takers for this regime and make it more tax beneficial for them, the Government then brought several changes in the new regime. Such as allowing standard deduction, higher basic exemption limit of Rs 3 lakh (as against Rs 2.5 lakh in the old regime), wider tax slabs, reduced surcharge from 37% to 25% on incomes above Rs 5 crore, nil tax liability for individuals with incomes up to Rs 7 lakh etc.
The government further made it a default tax regime w.e.f. FY 2023-24, continuing to move to its vision of a simplified tax system in India.
Marching towards the same goal, I expect that the government may propose further changes in the regime, to attract even those taxpayers who are still opting for the old tax regime. This may involve either further relaxing the slabs by widening them or restructuring them. Currently, 30% tax rate is applicable on incomes above Rs 15 lakh. The government may increase the same to Rs 20 lakh.
Also Read | Budget 2024: Government may offer guarantee under NPS to allay fears
Increasing the standard deduction
Standard deduction is a vanilla / blanket tax deduction allowed to the salaried taxpayers, irrespective of the expenses or investments done by them.
To provide further tax relief to the salaried taxpayers while keeping the tax system simple, I expect that the government may increase the standard deduction from Rs 50,000 to Rs 75,000 under the new tax regime.
Direct payment of income tax refund to overseas bank accounts
The income tax return form provides for mentioning the foreign bank account for direct credit of income tax refund, where the Non-Resident taxpayer does not have an Indian bank account. However, practically, such a facility is not yet active and the refunds cannot be credited to the foreign bank account for the NR taxpayer.
Also Read | Income Tax expectations Budget 2024: Tax exempt limit for savings account interest to be raised to Rs 25,000?
With a focus to improve taxpayer services and increasing use of technology and digital platforms in the tax system, I hope that the government activates the facility of direct credit of tax refund to foreign bank accounts.
With India on its track to “Viksit Bharat” by 2047, and with a high growth target, the Government may put more disposable income in the hands of taxpayers, so as to further fuel consumption and growth of the economy. Therefore, one may expect some tax reliefs in the Union Budget 2024, however, they may continue to be along the same theme followed in earlier budgets – simplifying and rationalizing the India tax system!
(The author is Partner Mainstay Tax Advisors LLP. Views expressed are personal)

Science & Environment

Budget 2024 income tax expectations: Top 10 things FM…

3 July 2024
by admin

Budget 2024 income tax expectations: Finance Minister Nirmala Sitharaman should increase the basic exemption limit under the new income tax regime and also raise the standard deduction threshold in the Union Budget 2024, says EY in its pre-Budget 2024 recommendations.
Currently the basic exemption limit under the new income tax regime is Rs 3 lakh. Standard deduction of Rs 50,000 is available in both the old and the new income tax regime.
The top Budget 2024 income tax expectations and recommendations by EY are as follows:

Increase in the basic exemption limit from Rs 3 lakhs to Rs 5 lakhs in the new tax regime and reduction in tax rates, in order to provide more disposable income in the hands of taxpayers
Overhaul of the capital gains tax structure – change in tax rates, method of computation etc.
Enhance the existing limit for deduction towards interest on housing loan for self-occupied house property from Rs 2 lakhs to at least Rs 3 lakhs
Raise the standard deduction threshold from Rs 50,000 to Rs 1,00,000
Remove the cap of Rs 2 lakhs towards the set-off of house property loss against other heads in the same year
Increase tax-free threshold for gifts from Rs 50,000 to Rs 100,000
Include tier 2 cities (Hyderabad, Pune, Bengaluru, Ahmedabad, Gurgaon etc.) in the list of metro cities for HRA exemption calculation purposes (from 40% to 50% of basic salary)
Enhance the extant tax-free LTCG ceiling on sale of equity shares/equity oriented mutual funds/units of a business trust from Rs 1 lakh to Rs 2 lakhs
Provide clarity on taxation of employer’s contribution to specified funds in excess of Rs 7.5 lakhs and ‘accretions’ thereon –clarify aspects such as identification of fund to which excess contributions are made, meaning of ‘accretions’ in case of Superannuation Fund/NPS and computation methodology
Increase the scope of deduction in respect of purchase of electric vehicles (quantum of interest deduction and removal of sunset period for sanction of loan)