New Income Tax Rules & Changes in Budget 2024

The Union Budget for the financial year 2024-25 (AY 2025-26), proposed some new changes in the income tax rules, effective from April 1, 2024, to the already prevailing income tax rules after Budget 2023.

From revising the income tax slab rates and raising the standard deduction limit to hiking the LTCG tax on debt mutual funds, Budget 2024 introduced some new updates in income tax rules for the current financial year.

Let’s see if these recent income tax updates for FY 2024-25 will help save the taxpayers’ money or end up increasing their tax liability.

Team Digit

Latest Changes in Income Tax 2024
Changes in Income Tax 2023
Frequently Asked Questions

Latest Changes in Income Tax for FY 2024-25 that Taxpayers Must Know

Read the given below the important new tax rules 2024 that will impact all types of taxpayers from FY 2024-25:

1. Revised Income Tax Slabs Under New Tax Regime

One of the most significant Budget 2024 income tax changes is the revision of tax slabs under the new tax regime for FY 2024-25. The revised income tax slab rates are:

Income Tax Slabs	Rate of Taxation
Up to ₹3,00,000	Nil
Between ₹3,00,001 and ₹7,00,000	5% of your total income that exceeds ₹3,00,000
Between ₹7,00,001 and ₹10,00,000	₹20,000 + 10% of your total income that exceeds ₹7,00,000
Between ₹10,00,001 and ₹12,00,000	₹50,000 + 15% of your total income that exceeds ₹10,00,000
Between ₹12,00,001 and ₹15,00,000	₹80,000 + 20% of your total income that exceeds ₹12,00,000
Above ₹15,00,001	₹1,40,000 + 30% of your total income that exceeds ₹15,00,000

2. Hiked Standard Deduction

From April 1, 2024, salaried individuals and pensioners who opt for the new regime will be eligible to claim tax benefit from a hiked standard deduction of ₹75,000 as per the income tax changes in Budget 2024. While for family pensioners, this deduction has been hiked to ₹25,000 under the new regime.

The standard deduction will help the taxpayers opting for the new tax regime to reduce their taxable income by ₹75,000; implying that individuals with an income up to ₹7.75 lakhs will not have to pay any tax.

3. Hiked Employer's Contribution to NPS in Taxable Salary

Under Section 80CCD(2), employees opting for the new tax regime will now get higher deduction on the salary contribution made to NPS by the employer. After Budget 2024, this deduction has been hiked up to 14% of salary (basic + DA) for all private and public sector employees. However, remember that this benefit is available under the new tax regime only.

4. New Capital Gains Taxation Rules

The Union Budget 2024-25 has proposed significant changes to the capital gains taxation, which are as follows:

Uniformity in the holding period for determining long-term and short-term for all listed securities to a period of 12 months, and for other assets a period of 24 months, is proposed.
No indexation of any long-term capital asset will be available for sale from July 23, 2024. However, the assets bought before 1 April 2001 will continue to get the indexation benefit.
The Budget 2024 rationalised the Long-term Capital Gains (LTCG) Tax to 12.5% without indexation (Section 112). Previously, this rate was 20% with indexation.
Short-Term Capital Gains (STCG) Tax u/s 111A is also hiked to 20%.
Further, exemption limit u/s 112A has been increased to ₹1.25 lakhs.
The Budget has also removed an anomaly in taxation of gold mutual funds, gold ETFs, fund of funds, and international equity funds. Now, investors will have to pay 12.5% LTCG tax, if the holding period is more than 24 months.
However, as per the previous Budget 2023, the investment in Market Linked Debentures (MLDs) from April 1, 2023, will continue to be taxed as per the slab rates for STCG or debt funds.

5. Simplification of TDS

The recent tax updates have simplified the application of Tax Deducted on Source (TDS). Here are the changes:

From FY 2024-25, the 5% TDS rate applicable to various payments has been reduced to 2%.
The TDS rate levied on e-commerce operators has also been significantly reduced to 0.1%, which was earlier 1%.
Further, the 20% TDS on repurchase of mutual fund or UTI units has been removed.
The Budget 2024-25 also proposed allowing a credit of Tax Collected at Source (TCS) against the TDS deducted on salaries. Further, failure of TDS payment within the due date has been decriminalized.
Also, buybacks will be taxed in the hands of the recipient as deemed dividends from 1st October 2024.

Income Tax Changes from FY 2023-24 (AY 2024-25)

1. Basic Exemption Limit Under New Tax Regime

The Budget 2023 hiked the basic exemption limit by ₹50,000. From April 1, the basic exemption under the new tax regime is ₹3 lakhs, which was ₹2.5 lakhs for all individual taxpayers, irrespective of age.

It implies that from FY 2023-24, individuals opting for the new tax regime will not have to pay any tax if their income from all sources is up to ₹3 lakhs in a financial year.

2. Higher Tax Rebate Under Section 87A

Under Budget 2023, individuals do not have to pay any tax if they have an annual income of up to ₹7 lakhs (after claiming all the eligible deductions) under the new tax regime, in a given financial year. Earlier this rebate was up to ₹5 lakhs.

Thus, as per the latest changes in income tax, taxpayers can enjoy a tax rebate under Section 87A where they can claim a tax rebate of up to ₹25,000, double of the previous financial year. So, they need not invest in tax-saving instruments as their entire income up to ₹7 lakhs would be tax-free.

3. Lower Surcharge Rate

Under the new tax regime in Budget 2023, the government decreased the highest surcharge rate for a taxable income of over ₹5 crores. Taxpayers will now be subject to a surcharge of 25% instead of 37% in previous financial years.

4. Life Insurance Premium Taxable Over ₹5 lakhs

Proceeds from traditional life insurance plans, which were typically used for tax-saving purposes, would be taxable from the new financial year, i.e., from 1st April 2023.

The money received on maturity for life insurance policies issued on or after 1 April 2023 would be taxed at applicable rates if the aggregate annual premium paid by an individual exceeds ₹5 lakhs. However, the 2023 new tax laws are not applicable to policies issued till March 31, 2023.

Also, the new tax rules won’t be applicable on ULIP (Unit Linked Insurance Plan).

5. LTA Encashment Limit

Non-government employees are in for a treat as the government has significantly hiked the tax exemption limit on leave encashment for Leave Travel Allowance (LTA) from FY 2023-24. They can now claim tax exemption up to ₹25 lakhs, while earlier the limit was set to ₹3 lakhs.

6. Senior Citizens Savings Scheme Limit Increased

To promote the welfare of senior citizens above the age of 60, the government has increased the maximum deposit limit for Senior Citizens Savings Scheme (SCSS) up to ₹30 lakhs from ₹15 lakhs, under recent changes in taxation.

Similarly, the maximum deposit limit for the monthly income scheme is increased to ₹9 lakhs from ₹4.5 lakhs for single accounts and ₹15 lakhs from ₹7.5 lakhs for joint accounts.

7. No Capital Gains Tax on Physical Gold Conversion to e-Gold Receipt

The Budget 2023 proposed that there will not be any capital gain tax on converting physical gold to Electronic Gold Receipts (EGRs) and vice versa, effective from 1 April 2023.

According to the government, this move is aimed at increasing the electronic gold investment opportunities and encouraging the digital gold market in India.

8. Tax Exemption on Property Sale Restricted

Under Sections 54 and 54F, the capital gains arising from the sale of residential property, or any other capital asset are eligible for tax exemption, provided the sale amount is invested in a new house property.

However, according to the new rules in income tax, the government has restricted the tax benefits up to ₹10 crores, effective April 1, 2023. Any gains above this amount will be taxed at 20% (with indexation benefit).

FAQs about New Rules in Income Tax 2024

All

Is there any change in the standard deduction for FY 2024-25?

As per recent changes in taxation for FY 2024-25, the standard deduction limit under the new tax regime is now hiked to ₹75,000 from ₹50,000.

How much is the family pension deduction for FY 2024-25?

From April 1, 2024, the family pensions deduction has been increased to ₹25,000 from ₹15,000.

Is there any change in the income tax slabs for FY 2024-25?

The income tax slabs in the new tax regime have been revised for FY 2024-25 (AY 2025-26). The 3 lakh-6 lakh slab has been increased to 7 lakhs; and the 6 lakhs-9 lakhs slab has become 7 lakh-10 lakhs.

Are investments made in PF and VPF tax deductible under the new tax regime?

No, all these investments are covered under section 80C; however, deductions under this section are not available under the new tax regime.

Is the amount in Agniveer Corpus Fund exempted from tax?

The withdrawals made from the Agniveer Corpus Fund are exempt from tax under both the tax regimes. Further the contribution to the Fun is tax deductible under Section 80CCH, and the amount received upon the end of tenure is also exempt from tax under Section 10(12C).

What is the rate of tax on Long Term Capital Gains?

Recent tax updates of 2024 have changed the LTCG tax to 12.5% without indexation.

How much is the surcharge amount under the new tax regime?

Under the revised new tax regime, the surcharge rate has been reduced from 37% to 25% for income above ₹5 crores.

Can I switch the income tax regime when ITR filing for FY 2024-25?

Yes, individual taxpayers can choose between the old and new tax regime to file ITR. They can even change it during ITR filing. However, companies cannot change once they’ve chosen the tax regime.

Are there any changes in tax deduction and exemption for FY 2023-24?

Deductions under 80C, 80TTA, 80D, HRA exemptions, etc. have been removed from the new tax regime after Budget 2023. However, individuals who are planning to continue with the old income tax regime can continue to claim these deductions.