10 things individual taxpayers should know

To provide relief to the middle class, FM has rationalized slab rates under the new tax regime and allowed additional standard deduction of 25,000 under it. This effectively increases the total standard deduction to 75,000. The new tax regime continues to be the default regime. Under the new tax regime for 2024-25, individuals can save as much as 17,500 in taxes with these changes.

● Rationalization of holding period for various assets with respect to capital gains has been proposed: 12 months for all listed securities (short term) and 24 months for all other assets (long term). Hence, the holding period for assets such as bonds, debentures, gold will reduce from 36 months to 24 months to be considered long term. For unlisted shares and immovable property, it remains at 24 months.

● Short-term capital gains tax rates on sale of assets such as equity shares on which Securities Transaction Tax (STT) is paid and equity-oriented mutual funds, has increased to 20% from the existing 15%. Short-term capital gains on sale of other financial assets will be taxed at applicable rates.

● The FM announced that long-term capital gains on sale of all listed financial and non-financial assets will attract a tax rate of 12.5%. Also, indexation benefit is no longer available for long-term capital assets, barring property acquired prior to 2001. Unlisted debentures and unlisted bonds are of the nature of debt instruments and therefore any capital gains on them will be taxed at applicable rates , whether short-term or long-term.

● Limit of exemption for long-term capital gains will be enhanced to 1.25 lakh per year from the existing threshold of 1 lakh per year for assets such as STT-paid equity shares and units of equity-oriented fund.

● Credit for tax collected at source (TCS) will be available against tax deducted (TDS) by the employer on salary income, which will ease the employee’s cash flow and avoid potential refund claim while filing tax returns. TCS is proposed to be levied on notified luxury goods exceeding 10 lakh from Jan 1, 2025.

● Deduction for employer’s contribution to NPS enhanced from the existing threshold of 10% to 14%, but only under the new tax regime.

● Income from owning and letting out house properties can no longer be categorised as business income (related expenses cannot be claimed as deduction) and needs to be reported as ‘income from house property’.

● Existing TDS rate on rent paid (of 50,000 or more) by individuals to Indian residents reduced to 2% from 5%.

● Penalties to be eliminated for resident taxpayers who do not report overseas movable assets (such as stock options) up to 20 lakh, which currently attract penalties under Black Money Act.
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