Budget 2024 impact on financial planning - Latest Income tax changes | Tax on stocks & mutual funds

Summary

The 2024 budget brings significant changes affecting personal finance and investment strategies. Key updates include revised income tax slabs offering tax-free income up to 7 lakhs, with varying rates beyond, and the elimination of certain deductions. Capital gains tax on equity investments sees an increase, with short-term gains taxed at 20% and long-term at 12.5%, though the exemption limit rises to 1.25 lakhs. Real estate taxation shifts, reducing long-term capital gains tax to 12.5% without indexation benefits. Additionally, custom duty on gold drops to 6%, impacting Sovereign Gold Bond returns. The video emphasizes the importance of financial planning with emergency funds, health insurance, and term plans, and suggests using Ditto Insurance for advice.

Takeaways

• 📊 The 2024 budget has introduced significant changes to personal finance and investment planning, particularly in income tax slabs, capital gains taxation, and customs duty on gold.
• 💼 New income tax slabs offer tax-free income up to 3 lakh, with progressive tax rates starting from 5% for income between 3 to 7 lakh, and peaking at 30% for income above 15 lakh.
• 🔍 The new tax regime appears more attractive at first glance due to lower tax rates and higher tax-free income limits, but the actual benefit depends on the deductions available under the old regime.
• 📉 The old tax regime offered various deductions such as investment in tax-saving instruments, medical expenses, home loan interest, and HRA, which may be more beneficial for some taxpayers.
• 🧮 Taxpayers with a salary up to 7.75 lakh may find the new tax regime more beneficial due to the standard deduction of 75,000, reducing their taxable income to 7 lakh where no tax is applicable.
• 📈 For those with higher incomes, it's crucial to calculate the tax liability under both regimes to determine which is more advantageous.
• 🏦 The budget has increased the tax rate on short-term capital gains from stocks and equity mutual funds from 15% to 20%, and on long-term capital gains from 10% to 12.5%.
• 🏠 Changes in real estate taxation include a reduction in long-term capital gains tax to 12.5% but the removal of indexation benefits, which could impact the tax paid on property sales.
• 📉 The reduction of customs duty on gold from 15% to 6% has led to a decrease in gold prices, benefiting new buyers but potentially affecting the returns of those who invested in Sovereign Gold Bonds.
• 🛡️ Financial planning basics such as building an emergency fund, taking health insurance, and a term plan are emphasized as essential steps before investing.
• 💡 The Ditto Insurance platform is recommended for health insurance comparison and advice, with a high rating and user-friendly approach to understanding health plans.

Q & A

What are the key changes in the income tax slabs announced in the Budget 2024?

The key changes include making income up to 3 lakh tax-free, 5% tax on income from 3 to 7 lakh, 10% tax on income from 7 to 10 lakh, 15% tax on income from 10 to 12 lakh, 20% tax on income from 12 to 15 lakh, and 30% tax on income above 15 lakh. Previously, the tax slabs were different, with rebates and different rates.

What is the catch with the new income tax slabs that one should be aware of?

The catch with the new income tax slabs is the removal of multiple deductions that were previously allowed under the old tax slabs, such as deductions for investments in tax-saving instruments, medical expenses, home loan interest, and HRA.

How does the new tax slab affect a salaried employee with an income of up to 7 lakh?

For a salaried employee with an income of up to 7 lakh, the new tax slab is more beneficial as there would be no tax due to the higher tax-free limit and the absence of deductions might not impact them significantly.

What is the standard deduction under the new income tax slab?

The standard deduction under the new income tax slab is 75,000 rupees, which is higher than the standard deduction in the old tax slab.

How can one determine which tax slab is better for their specific financial situation?

One can use an income tax calculator to input their gross income, deductions, and choose the old or new tax regime to see which results in a lower tax liability.

What are the changes in taxation for capital gains from stocks and equity mutual funds in the Budget 2024?

The changes include an increase in the short-term capital gain tax rate from 15% to 20% and an increase in the long-term capital gain tax rate from 10% to 12.5%. Additionally, the tax exemption limit for long-term capital gains has been raised from 1 lakh to 1.25 lakh.

What is the impact of the new tax regime on small and large investments in stocks and equity mutual funds?

For small investments, the increase in the tax exemption limit for long-term capital gains is beneficial. However, for larger investments, especially those with longer financial goals, the higher tax rates under the new regime may result in a higher tax liability.

How does the new tax rule on capital gains from real estate compare to the old rule?

The new tax rule reduces the long-term capital gain tax rate from 20% to 12.5% but removes the indexation benefit, which adjusted the purchase price for inflation. This change can result in a higher effective tax rate, especially for properties held for a long time.

What is the significance of the reduction in custom duty on gold in the latest budget?

The reduction in custom duty on gold from 15% to 6% has led to a decrease in gold prices, making it more affordable for those looking to purchase gold. However, it may negatively impact the returns for those who invested in Sovereign Gold Bonds, especially those nearing the end of their 8-year lock-in period.

What are the three essential steps one should take for financial planning as per the video?

The three essential steps for financial planning are building an emergency fund, taking health insurance, and taking a term plan. These steps help in managing unexpected expenses, medical costs, and provide financial security for dependents in case of an unfortunate event.

Why is it recommended to book a free one-on-one call with an advisor on the ditto Insurance platform?

Booking a free one-on-one call with an advisor on the ditto Insurance platform is recommended because it allows individuals to get personalized advice on choosing the right health insurance plan, understand the terms and conditions, and ensure they are making informed decisions about their health coverage.

How does the new budget impact the investment in Sovereign Gold Bonds?

The reduction in custom duty on gold and the subsequent fall in gold prices may impact the returns for those who invested in Sovereign Gold Bonds, especially those nearing the end of their 8-year lock-in period. Additionally, there are discussions about the government potentially discontinuing Sovereign Gold Bonds in the future.