Budget 2024 has tried to address some key asks of the taxpayers by making the simplified tax regime slightly more attractive and in alignment with the overall objective of the Government to rationalize/ simplify the income tax law
Continuing with the trend of attracting more and more taxpayers towards the simplified tax regime, Budget 2024 has proposed a slew of changes to the new personal tax regime (NPTR) alongside addressing a long standing ask for simplification of the capital gains regime.
Some of the key changes proposed in Budget 2024 for individual taxpayers are as follows:
Rejig of tax slabs under NPTR
Tax slabs under the NPTR are proposed to be tweaked slightly – 5 per cent tax slab has been extended by Rs 100,000 from an income level of Rs 600,000 to Rs 700,000. The 10 per cent tax slab has also been extended by the same amount to an income of up to Rs 1,000,000. This slab rate change results in a tax saving of up to Rs 10,000 to individuals before surcharge and cess.
Enhanced standard deduction
Standard deduction of Rs 50,000 was introduced in the NPTR by Budget 2023 bringing NPTR at par with the old tax regime. Budget 2024 has proposed to enhance this standard deduction by Rs 25,000 for the taxpayers opting for NPTR making the total standard deduction available as Rs 75,000. This will result in an additional tax savings of up to Rs 7,500 before surcharge and cess. Similar change is also proposed in the maximum standard deduction available on family pension income which is to be raised from Rs 15,000 to Rs 25,000.
Higher deduction for contributions to NPS
Employees opting for NPTR will now be eligible for a deduction of up to 14 per cent of their basic salary and dearness allowance as employer’s contribution towards NPS under Section 80CCD(2) of the Income-tax Act as against 10 per cent for those opting for the old regime. This proposal brings the NPS deduction for individuals opting for NPTR in line with the deduction enjoyed by the government employees.
Rationalization of Capital Gains Regime
Over the years, Indian capital tax gains structure had grown to become a complicated one due to multiple changes in the period of holding, asset classification and tax rates.
Decriminalization of offences regarding non-reporting of some foreign assets
Non reporting of foreign assets in case of Resident taxpayers constitutes a grave offence under the Black Money Act. However, considering the steep penalties associated with such non reporting, it is proposed that if foreign assets (other than immovable property) such as employee stock options, balances in social security schemes aggregating up to Rs 2,000,000 are missed to be disclosed by individuals in their tax return, the same shall not be penalised under the Black Money Act, 2015.
Overall, Budget 2024 has tried to address some key asks of the taxpayers by making the simplified tax regime slightly more attractive and in alignment with the overall objective of the Government to rationalize/ simplify the income tax law.
The Government has also proposed a comprehensive review of the income tax law to make it easy to understand. This is also reflected in the rationalization of the provisions relating to capital gains. As with more than two-thirds of the taxpayers moving towards the simplified tax regime and with concerted efforts of the Government, old tax regime may soon fade out due to higher tax benefits under the simplified regime.
(Tarun Garg is a Director with Deloitte Haskins & Sells LLP. Nitish Kohli, Associate Director, Deloitte Haskins & Sells LLP has also contributed to this article.)
(Views expressed are personal.)