Union Budget 2024 Tax Changes: FM Nirmala Sitharaman in the Union Budget 2024 announced some key changes to tax slabs and Standard Deduction under the new tax regime, leaving many taxpayers confused whether these tweaks would be applicable when they file their ITR for the assessment year 2024-25.

Are you among those taxpayers who are uncertain about the appropriate tax rates to apply when calculating their income tax liabilities for the upcoming ITR filing deadline on July 31?

The government unveiled several key changes in Budget 2024, including adjustments to tax slabs in the new tax regime, a revised tax rate on capital gains, an increased standard deduction, and a new rate for the securities transaction tax (STT). These changes will be relevant when filing your income tax return (ITR) for the financial year 2024-25 next July.

Additionally, the new capital gains tax rates were implemented immediately as of July 23, 2024, adding to the urgency and complexity for taxpayers navigating these revisions.

Also read: ITR Filing Date 2024 Live Updates: Income tax return deadline to be extended beyond July 31? What we know so far

How will recent tax-related changes in Union Budget impact your ITR filing next year?

The ITR you have filed or are planning to file before July 31, 2024 pertains to your earnings for the financial year 2023-24. While the announcements regarding tax changes made by the FM in the Union Budget were relevant for the ongoing financial year (April 1, 2024-March 31, 2025) or the Assessment Year 2025-26. So all the changes like tax slab tweaks, hike in Standard Deduction and updated capital gains rates will be effective retrospectively from April 1, 2024.

Also read: ITR Due Date: If you fail to meet July 31 tax return filing deadline, you will lose all Old Tax Regime benefits!

When do the new rates and changes take effect?

New income tax rates will come into effect from April 1, 2024 but these changes will impact taxpayers’ income tax return (ITR) filing from next assessment year (2025-26).

Capital gains tax rates became effective on the same day the budget was presented in Parliament on July 23, 2024. So, if you are making gains from the sale of assets taking place after July 23, 2024, will attract updated tax rates announced in the Budget.

One of the highlights of the tax related changes in the budget was an increase in the standard deduction for salaried employees from Rs 50,000 to Rs 75,000. This higher deduction will be effective under the new tax regime for the financial year 2024-25, not for FY 2023-24.

So while filing your income tax return (ITR) for the financial year 2023-24, you may not be able to claim higher standard deduction announced in the recent budget. The higher deduction can be availed next year when you file the ITR for the financial year 2024-25.

Why are taxpayers confused over tax changes ahead of ITR filing?

Usually, the Union Budget is presented every year on February 1 so whatever announcements are made by the government, they are relevant for the next fiscal year starting April 1. In simple terms, all budget announcements are made a year in advance in February for the following financial year. With 2024 being an election year, there was an interim budget presented in February this year and post Lok Sabha polls, a full-fledged budget was tabled.