Budget 2024 Tax Updates: New Income Tax Slab, Change in STCG and LTCG Rate

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Budget 2024 Tax Updates

The Union Budget 2024 made some sweeping changes in the capital gains tax regime along with some tweaks in the personal income tax. Finance Minister Nirmala Sitharaman also announced changes in the Securities Transaction Tax on F&O trading. In this blog, we give details on the new changes made to the income tax in the Budget. 

New Income Tax Slab Announced in Budget 2024

The Union Budget 2024 has announced new income tax slabs under the new tax regime. Here's a table summarising the announced slabs:

Income Range (₹)Tax Rate (%)
Up to 3,00,000Nil
3,00,001 to 7,00,0005
7,00,001 to 10,00,00010
10,00,001 to 12,00,00015
12,00,001 to 15,00,00020
Above 15,00,00030

The government has also raised the standard deduction under the new tax regime to Rs 75,000 from Rs 50,000.

Note: It's always wise to consult with a tax advisor for personalised advice on your tax situation.

Changes in Taxes

Tax CategoryPrevious StructureNew StructureImpact
Short-Term Capital Gains (STCG)15%20%Increase in tax rate by 5%. May discourage short-term trading.
Long-Term Capital Gains (LTCG)10% on gains above ₹1 lakh12.5% on gains above ₹1.25 lakh <br> Exemption limit increased to ₹1.25 lakhSlightly higher tax rate, but exemption limit increase provides some relief.
20% TDS on Repurchase by Mutual Fund or UTIAppliedWithdrawnPositive change for investors. Improves liquidity and attractiveness of mutual fund investments.
Standard Deduction (New Tax Regime)₹50,000₹75,000Greater tax relief for salaried individuals and pensioners. Increases disposable income.
Securities Transaction Tax (STT)
  • Futures: 0.0125%
  • Options: 0.0625%
  • Futures: 0.02%, 
  • Options: 0.10%.
Might reduce overall profitability for traders and investors.


How Will the 2024 Budget Tax Changes Impact Your Investments?

Here’s how various proposed changes in taxation during the Budget will impact your investments:

  • Short-Term Capital Gains (STCG): Tax rate increased from 15% to 20%, a 5% rise that may discourage short-term trading.
  • Long-Term Capital Gains (LTCG): Tax rate increased from 10% to 12.5% on gains above ₹1.25 lakh, with the exemption limit raised from ₹1 lakh to ₹1.25 lakh, offering some relief despite a slightly higher tax rate.
  • TDS on Repurchase by Mutual Fund or UTI: Previously applied 20% TDS is now withdrawn, enhancing liquidity and making mutual fund investments more attractive.
  • Standard Deduction (New Tax Regime): Increased from ₹50,000 to ₹75,000, providing greater tax relief for salaried individuals and pensioners, thus increasing disposable income.
  • Securities Transaction Tax (STT): The STT on Futures rises from 0.0125% to 0.02%, and on Options from 0.0625% to 0.10%, reflecting a higher cost for trading in these instruments.

History of Capital Gains Tax in India

PeriodKey EventsCapital Gains Tax RatesDividend Tax
1947 (introduced permanently in 1956)Introduction of Capital Gains Tax
  • Up to ₹15,000: Exempt 
  • Graduated rates up to 31.3%
N/A
Today (2024)Current Tax Structure
  • LTCG up to ₹1 lakh: Exempt 
  • LTCG above ₹1 lakh: 10% 
  • STCG: 15%
Taxable in the hands of shareholders
1992Manmohan Singh BudgetIntroduced indexation for LTCG and 20% tax rate for LTCGN/A
1997P. Chidambaram BudgetAbolished dividend tax, and introduced Dividend Distribution Tax (DDT)DDT implemented
1999Yashwant Sinha Budget10% tax on LTCG, introduced STCG at slab rateRe-introduced tax on dividends
2002Yashwant Sinha BudgetDividends are taxed again, LTCG at 20% with indexation or 10% without, STCG at slab rateTaxable in hands of shareholders
2003Jaswant Singh BudgetTax-free status brought back for dividendsTax-free dividends
2004P. Chidambaram BudgetLTCG exempted, introduced Securities Transaction Tax (STT). 10% flat rate tax on STCGN/A
2008P. Chidambaram BudgetIncreased STCG tax to 15%N/A
2016Arun Jaitley Budget10% tax on dividend income exceeding ₹10 lakh, LTCG exempt, STCG at 15%Tax on dividends exceeding ₹10 lakh
2018Arun Jaitley BudgetRe-introduced 10% LTCG tax on gains above ₹1 lakh, STCG at 15%Taxable in the hands of shareholders
2020Nirmala Sitharaman BudgetCurrent structure: LTCG 10% above ₹1 lakh, STCG 15%, dividends taxableTaxable in the hands of shareholders

Conclusion

The tax changes post-Budget 2024 will have an impact on various aspects of investments, particularly in capital gains. Investors are advised to carefully review their portfolios and consider adjusting their investment plans to maximise the benefits available under the new tax regime. It's important to stay informed about these changes and consult with a tax advisor to make well-informed decisions based on individual financial situations.

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