The Union Budget 2024 made some sweeping changes in the capital gains tax regime along with some tweaks in the personal income tax. Finance Minister Nirmala Sitharaman also announced changes in the Securities Transaction Tax on F&O trading. In this blog, we give details on the new changes made to the income tax in the Budget.
New Income Tax Slab Announced in Budget 2024
The Union Budget 2024 has announced new income tax slabs under the new tax regime. Here's a table summarising the announced slabs:
| Income Range (₹) | Tax Rate (%) |
| Up to 3,00,000 | Nil |
| 3,00,001 to 7,00,000 | 5 |
| 7,00,001 to 10,00,000 | 10 |
| 10,00,001 to 12,00,000 | 15 |
| 12,00,001 to 15,00,000 | 20 |
| Above 15,00,000 | 30 |
The government has also raised the standard deduction under the new tax regime to Rs 75,000 from Rs 50,000.
Note: It's always wise to consult with a tax advisor for personalised advice on your tax situation.
Changes in Taxes
| Tax Category | Previous Structure | New Structure | Impact |
| Short-Term Capital Gains (STCG) | 15% | 20% | Increase in tax rate by 5%. May discourage short-term trading. |
| Long-Term Capital Gains (LTCG) | 10% on gains above ₹1 lakh | 12.5% on gains above ₹1.25 lakh <br> Exemption limit increased to ₹1.25 lakh | Slightly higher tax rate, but exemption limit increase provides some relief. |
| 20% TDS on Repurchase by Mutual Fund or UTI | Applied | Withdrawn | Positive change for investors. Improves liquidity and attractiveness of mutual fund investments. |
| Standard Deduction (New Tax Regime) | ₹50,000 | ₹75,000 | Greater tax relief for salaried individuals and pensioners. Increases disposable income. |
| Securities Transaction Tax (STT) |
|
| Might reduce overall profitability for traders and investors. |
How Will the 2024 Budget Tax Changes Impact Your Investments?
Here’s how various proposed changes in taxation during the Budget will impact your investments:
- Short-Term Capital Gains (STCG): Tax rate increased from 15% to 20%, a 5% rise that may discourage short-term trading.
- Long-Term Capital Gains (LTCG): Tax rate increased from 10% to 12.5% on gains above ₹1.25 lakh, with the exemption limit raised from ₹1 lakh to ₹1.25 lakh, offering some relief despite a slightly higher tax rate.
- TDS on Repurchase by Mutual Fund or UTI: Previously applied 20% TDS is now withdrawn, enhancing liquidity and making mutual fund investments more attractive.
- Standard Deduction (New Tax Regime): Increased from ₹50,000 to ₹75,000, providing greater tax relief for salaried individuals and pensioners, thus increasing disposable income.
- Securities Transaction Tax (STT): The STT on Futures rises from 0.0125% to 0.02%, and on Options from 0.0625% to 0.10%, reflecting a higher cost for trading in these instruments.
History of Capital Gains Tax in India
| Period | Key Events | Capital Gains Tax Rates | Dividend Tax |
| 1947 (introduced permanently in 1956) | Introduction of Capital Gains Tax |
| N/A |
| Today (2024) | Current Tax Structure |
| Taxable in the hands of shareholders |
| 1992 | Manmohan Singh Budget | Introduced indexation for LTCG and 20% tax rate for LTCG | N/A |
| 1997 | P. Chidambaram Budget | Abolished dividend tax, and introduced Dividend Distribution Tax (DDT) | DDT implemented |
| 1999 | Yashwant Sinha Budget | 10% tax on LTCG, introduced STCG at slab rate | Re-introduced tax on dividends |
| 2002 | Yashwant Sinha Budget | Dividends are taxed again, LTCG at 20% with indexation or 10% without, STCG at slab rate | Taxable in hands of shareholders |
| 2003 | Jaswant Singh Budget | Tax-free status brought back for dividends | Tax-free dividends |
| 2004 | P. Chidambaram Budget | LTCG exempted, introduced Securities Transaction Tax (STT). 10% flat rate tax on STCG | N/A |
| 2008 | P. Chidambaram Budget | Increased STCG tax to 15% | N/A |
| 2016 | Arun Jaitley Budget | 10% tax on dividend income exceeding ₹10 lakh, LTCG exempt, STCG at 15% | Tax on dividends exceeding ₹10 lakh |
| 2018 | Arun Jaitley Budget | Re-introduced 10% LTCG tax on gains above ₹1 lakh, STCG at 15% | Taxable in the hands of shareholders |
| 2020 | Nirmala Sitharaman Budget | Current structure: LTCG 10% above ₹1 lakh, STCG 15%, dividends taxable | Taxable in the hands of shareholders |
Conclusion
The tax changes post-Budget 2024 will have an impact on various aspects of investments, particularly in capital gains. Investors are advised to carefully review their portfolios and consider adjusting their investment plans to maximise the benefits available under the new tax regime. It's important to stay informed about these changes and consult with a tax advisor to make well-informed decisions based on individual financial situations.