Union Budget 2024: Reading the fine print of the new tax regime

Financial planner and SEBI registered investment advisor, Kalpesh Ashar explains implications of the new income tax regime, indexation removal, and increased STT on F&O trading

Nirmala Sitharaman presented the Union Budget for the financial year 2024-25 on Tuesday, proposing major changes in taxes, terming them as beneficial and relief-providing measures for the middle class.

Financial planner and SEBI registered investment advisor, Kalpesh Ashar, shares that with the changes proposed on personal income tax, taxpayers will have more money, and they can choose to either spend it or invest it.

The government announced an increase in standard deduction from Rs. 50,000 to Rs. 75,000 while also widening the tax slabs under the new tax regime. It also promised to simplify tax structures. However, criticizing the promise, Ashar says that they are not really simplified since five tax slabs continue to be in the new regime.

In the realm of capital markets, Sitharaman announced an increase in the Securities Transaction Tax (STT) in the Futures and Options segment. Ashar suggests that this may be a part of the government's efforts to curb rampant investments in F&O since it is a speculative environment and risk for rookie investors. "They want people to invest their savings in long-term assets that are safer to invest in and not in schemes that help you make a fast buck," he says. He advises that the right way to invest is through long-term assets like mutual funds, a blossoming industry with tremendous potential. 

The LTCG tax rate on property sales has decreased from 20 percent to 12.5 per cent, but the indexation benefit has been eliminated. Simply put, those investing in real estate will face a reduced tax but without the ability to lower taxable profits through indexation. Ashar suggests that with this provision, home-buying may not continue to be a get-in-get-out asset class for investors. "People will now think twice if they wish to buy a house for investment or for consumption," he says. 

He criticizes the budget from the micro level since tax structures were not simplified as claimed by the Finance Minister. However, on a macro level, Ashar applauds this budget, calling it a brilliant blueprint for an economy the country should be headed to.

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