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5 major changes in the last 6 months every taxpayer should know!
January, 27th 2025

With Budget 2025 just around the corner, taxpayers eagerly anticipate what’s in store for their financial planning. The previous budget presented in July 2024, the first of the Modi 3.0 regime, introduced some changes under the new tax regime, from revised tax slabs to increased standard deduction. This year again, expectations are high for more taxpayer-friendly reforms, including potential tweaks in income tax slabs, capital gains tax, and benefits for salaried individuals.

Some key changes were announced for taxpayers under the new tax regime in the last budget. One of the key changes was tax slab tweaking, as the new tax rules applicable from April 1, 2024 aim to make the tax system simple and transparent, as the government claims. Also, by making the new tax system more attractive, the tax department is encouraging more and more taxpayers to adopt it.

Taxpayers, like in previous years, wonder if the government will address their concerns and ease their tax burden in the upcoming budget for FY2025-26. However, in this story, we will not focus on taxpayer expectations but rather look at the 5 major changes announced in the previous Budget 2024-25. As the last budget happened in July-end and the next one taking place on February 1, taxpayers may see some major changes getting effected at just a 6-month interval.

 

5 major changes announced in Budget 2024-25

  1. New tax slabs

The tax slabs have been changed in the new tax system so that taxpayers can get more relief.

Rs 0-3 lakh: 0% tax

Rs 3-7 lakh: 5%

Rs 7-10 lakh: 10%

Rs 10-12 lakh: 15%

Rs 12-15 lakh: 20%

Rs 15 lakh and above: 30%

These new slabs can help middle-income taxpayers save up to Rs 17,500.

  1. Increase in Standard Deduction

The limit of standard deduction has been increased from Rs 50,000 to Rs 75,000.

The limit for family pensioners has also been increased from Rs 15,000 to Rs 25,000.

This will provide relief to salaried and retired taxpayers.

  1. Additional deduction on contribution to NPS

The deduction limit on an employer’s contribution to the National Pension System (NPS) has been increased from 10% to 14%. This change will motivate employees to save more in their retirement funds.

  1. Changes in capital gains tax

The tax rate on short-term capital gains (STCG) has been increased from 15% to 20%.

The tax rate on long-term capital gains (LTCG) has been increased from 10% to 12.5%.

The LTCG exemption limit on equity investments has been increased from Rs 1 lakh to Rs 1.25 lakh.

This change is aimed at encouraging investors to invest in the long term.

  1. TCS on luxury goods

Tax Collection at Source (TCS) implemented on luxury goods worth more than Rs 10 lakh. This rule became effective on January 1, 2025.

The decision was aimed at tracking expensive transactions and reducing tax evasion.

Impact of new tax rules:

Relief to the middle-income group: Changes in tax slabs and the standard deductions will give more disposable income to the middle class.

Promotion of the new tax regime: The government has tried to make the new system attractive, which will encourage people to adopt it.

Change in investment pattern: With more exemptions on LTCG, people will give priority to long-term investment.

Eye on high-value transactions: Imposing TCS on luxury goods will help the government monitor large transactions.

Tips for tax planning:

Choose new vs. old tax regime: Choose the right regime based on your income and expenses.

Increase investment in NPS: Take advantage of additional benefits from employer contributions.

Focus on long-term investments: To take advantage of LTCG exemption.

Be careful on luxury purchases: Keep an eye on TCS.

Conclusion:

With these changes announced in the last budget for only the new tax regime, taxpayers under the old tax regime are hopeful that they would probably also get some relief in taxes from FM Nirmala Sitharaman when she presents the Union Budget 2025-25 in a couple of weeks from now.

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