NEW DELHI: As expected, the Union Budget did offer some relief for individual taxpayers. The standard deduction for salaried employees has been increased from Rs 50,000 to Rs 75,000 for those opting for the New Tax regime.
Similarly, the deduction on family pension for pensioners has been enhanced from Rs 15,000 to Rs 25,000.
“This will provide relief to about four crore salaried individuals and pensioners,” said Finance Minister Nirmala Sitharaman while making the announcement.
The budget also tweaked the tax rate structure under the new tax regime as following:
| 0-3 lakh rupees | Nil |
| 3-7 lakh rupees | 5 per cent |
| 7-10 lakh rupees | 10 per cent |
| 10-12 lakh rupees | 15 per cent |
| 12-15 lakh rupees | 20 per cent |
| Above 15 lakh rupees | 30 per cent |
According to the Finance Minister (FM), the change in tax structure will result in a salaried employee under the new tax regime saving up to Rs 17,500 in income tax.
The FM slipped in a bit of surprise in the budget by changing the capital gains tax structure.
Short-term gains on specified financial assets will now attract a tax rate of 20 per cent instead of 15 per cent, while that on all other financial assets and non-financial assets will continue to attract the applicable tax rate.
Long-term gains on all financial and non-financial assets, on the other hand, will attract a tax rate of 12.5 per cent from the earlier 10 per cent. However, for the benefit of the lower and middle-income classes, it has been proposed to increase the limit of exemption of capital gains on certain listed financial assets from Rs 1 lakh to Rs 1.25 lakh per year.
Other changes in the capital gains structure include listed financial assets held for more than a year will be classified as long-term. At the same time, unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term.
Currently, several non-financial assets need to be held for more than three years to be eligible for a lower long-term capital gains tax.
Unlisted bonds and debentures, debt mutual funds and market-linked debentures, irrespective of the holding period, however, will attract tax on capital gains at applicable rates. These proposals are proposed to be given effect with immediate force.
In other major changes impacting individual taxpayers, the budget extends the deduction benefit for employers contributing towards the National Pension System (NPS) from 10 per cent to 14 per cent of the employee’s salary.
Similarly, a deduction of this expenditure of up to 14 per cent of salary from the income of employees in private sector, public sector banks and undertakings, opting for the new tax regime, is proposed to be provided.