Following the announcement of Budget 2024-25, the middle class is eager to understand how it will impact them. The main question is where the Budget places India’s middle class. This depends on three main factors: your income level, the tax system you have chosen, and the details of your investments.
Under the new tax regime, individuals with an income of Rs 7.75 lakh per year can now have their tax liability reduced to zero due to the increase in the standard deduction amount and changes in tax slab. For instance, there is no tax on income up to Rs 3 lakh, and a 5% tax rate applies to income between Rs 3 lakh and Rs 7 lakh. With a rebate of Rs 25,000 under Section 87A and a standard deduction of Rs 75,000, individuals can be exempt from taxes up to an income of Rs 7.75 lakh.
Despite these changes, the old tax regime has not been altered in Budget 2024. Opting for the old regime is favorable for those benefiting from deductions like HRA, LTA, 80C, and 80D.
The treatment of capital gains has also been adjusted, with short-term gains from equities now taxed at 20% instead of 15%. This means that a profit of Rs 2 lakh from equity trading within a year will result in a tax liability of Rs 40,000. Additionally, selling property held for more than two years may lead to losses as inflation adjustment benefits have been discontinued, even though the tax rate on gains has decreased from 20% to 12.5%.
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