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How Budget 2024 Reforms Shape Your Personal Finance – Forbes India Blogs

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How Budget 2024 Reforms Shape Your Personal Finance – Forbes India Blogs

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Budget Day is always a momentous occasion, sparking keen interest as we dissect its implications on our finances. While the certainty of taxes is something we all face, our primary concern is often how these changes impact our take-home pay, particularly for salaried individuals. Let’s break down this year’s Budget and see what it means for you.

As we adapt to these updates, keep your focus on what you can control: your personal growth and income. Investing in yourself and working to enhance your earnings can make a significant difference. Although taxes are a constant, steering your financial future lies in your hands.

Changes in your tax slab:

The Budget has revised the tax slabs in the new tax regime to enhance its appeal to taxpayers. Under this regime, the standard deduction is proposed to increase from ₹50,000 to ₹75,000.

Pay No Tax on an Income of up to ₹7.75 Lakh

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The recent changes in tax slabs will result in significant savings for lower and middle-income groups, while those in higher-income brackets will see minimal impact. These adjustments allow salaried employees in the new tax regime to save up to ₹17,500 in income tax.

The higher standard deduction of ₹75,000 means that anyone with an annual income of ₹7.75 lakh will not have to pay any tax. Additionally, under the new regime, taxpayers with an annual income of up to ₹7 lakh are eligible for a full tax rebate under Section 87A.

This is the second change in the new tax regime’s slab structure in as many years. Last year’s Budget reduced the number of slabs from seven to six and extended the standard deduction to the new regime. Let me explain:

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Improved Financial Stability for Pensioners

The Budget 2024 proposes increasing the family pension deduction from ₹15,000 to ₹25,000, providing greater financial stability for pensioners. Meanwhile, taxpayers who prefer the old tax regime will see no changes in their tax liabilities, as no updates were announced for that system.

Simplification of capital gains on real estate transactions:

The Budget 2024 has removed the indexation benefit for property sales, changing how capital gains are calculated. Previously, sellers could adjust their purchase price for inflation, reducing their taxable gains, and were taxed at 20 Percent on long-term capital gains (LTCG). Now, the LTCG tax rate is reduced to 12.5 percent, but without the inflation adjustment.

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Here is an example to illustrate this change:

Mr. A bought a property for ₹50 lakh in FY 2004-2005. He sells the property in FY 2023-2024 for ₹1.5 crore. Under the previous rules, the purchase price of ₹50 lakh would be adjusted for inflation using the Cost Inflation Index (CII) numbers provided by the Income Tax Department. However, under the new rules, there will be no adjustment for inflation. The capital gains will be calculated by directly subtracting the purchase price from the sale price. Although the good news is that the LTCG tax rate has been reduced from 20 percent to 12.5 percent, the lack of indexation requires careful calculation to determine the actual tax impact.

Also Read- Budget 2024: Higher taxes for markets investors, F&O clampdown

The objective is to simplify capital gains taxation by reducing the LTCG tax rate to 12.5 percent and removing the indexation benefit. This change is intended to make capital gains calculations easier for both taxpayers and tax authorities.

How the Indexation Removal Affects Real Estate Investors

The elimination of indexation benefits poses a challenge for long-term real estate investors. Without this adjustment, taxable capital gains are likely to rise, increasing the tax burden on property sales. This could reduce net profits and potentially deter investment in real estate, especially for those who have held properties for an extended period where inflation has had a greater impact.

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New Tax Relief for Multiple Properties and Short-Term Rentals

Under the new tax rules, individuals can now designate up to two properties as self-occupied. This change is advantageous for homeowners with multiple properties or those renting out homes on short-term platforms like Airbnb, providing relief and simplifying tax management.

Increased Long-Term Capital Gains Tax on financial assets

The long-term capital gains tax (LTCG) has been raised from 10 percent to 12.5 percent across all financial and non-financial assets. Short-term capital gains (STCG) on specific assets will now be taxed at 20 percent. The exemption limit for LTCG has also increased from ₹1 lakh to ₹1.25 lakh. The Budget clarifies that listed financial assets held for over a year will be deemed long-term, while unlisted financial assets and non-financial assets must be held for at least two years to qualify.

Also Read- Budget 2024 is a quest for equitable growth: CRISIL

I see these changes may create concerns about potential future tax increases, but it’s essential to remember that equity gains could offset some of these taxes. Equity mutual funds remain a compelling investment option. As I always say, “Death and taxes are certain,” so focusing on increasing income and controlling what you can is key.

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Budget 2024 Highlights: STT Hike and NPS Enhancements

STT Increase for Futures and Options:

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Futures and Options (F&O) traders will face a significant tax increase as the Security Transaction Tax (STT) rises from 0.01 percent to 0.02 percent. This adjustment will effectively double the tax on equity and index trades.

Boost in NPS Tax Deductions:

The deduction limit for employer contributions to the New Pension Scheme (NPS) is set to rise from 10 percent to 14 percent. This enhancement will benefit both public and private sector employees, aligning their tax advantages with those of government employees.

Introduction of NPS Vatsalya for Minors:

The new NPS Vatsalya scheme allows parents to contribute to a minor’s NPS account, which will convert to a regular NPS plan upon the child’s 18th birthday. This scheme fosters early financial discipline and seamlessly transitions to a standard NPS plan.

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Changes to Buyback Taxation and Reporting Requirements

Buybacks Taxed as Dividends:

Starting October 1, buybacks will be taxed as dividend income, significantly reducing their appeal to investors. This proposal may alter investment strategies, making buybacks less attractive compared to before.

Relaxed Penalties for Foreign Assets:

The Budget introduces a relaxation in penalties for not reporting foreign assets up to ₹20 lakh. This change aims to ease the burden on small taxpayers who may have inadvertently overlooked reporting overseas assets.

Eased TDS for Salaried Employees:

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From October 1, salaried employees will benefit from reduced Tax Deducted at Source (TDS) as they can now declare Tax Collected at Source (TCS) to their employers. This update will help manage cash flow better and allow any refunds due to be adjusted directly against TDS.

These changes bring both challenges and opportunities. The shift in buyback taxation may prompt investors to reconsider their strategies, while relaxed penalties and adjusted TDS rules offer significant relief to taxpayers. It’s crucial to stay informed and adapt to these updates to optimise your financial planning.

The writer is a Chartered Accountant and founder of NRP Capitals.

The thoughts and opinions shared here are of the author.

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Finance

German finance minister wants to scrap spousal tax splitting

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German finance minister wants to scrap spousal tax splitting

Last weekend, several thousand people took to the streets in Munich to demonstrate against abortion and assisted suicide. One speaker made an extremely dramatic plea against what he called the “culture of death” that has allegedly taken hold in Germany. One sign of this, the speaker argued, was that the government is planning to abolish a regulation known as “spousal tax splitting.”

Is tax law really relevant to deep philosophical debates on the sanctity of life? It is even a matter of life and death at all? Surely we needn’t go that far? In any case, the intense political uproar surrounding the new debate on whether to abolish spousal tax splitting is notable, even by today’s standards of populist outrage.

An advantage for couples with widely divergent incomes

The row was sparked by Germany’s vice chancellor and finance minister, Lars Klingbeil, of the center-left Social Democratic Party (SPD), who said he wanted to abolish and replace the joint taxation of spouses’ income, a system that has been in place since 1958.

How exactly does spousal tax splitting work? In Germany, married couples (and since 2013, couples in civil partnerships), can choose to have their income assessed jointly by the tax authorities.

It means that the taxable income for both spouses together is halved – as if both partners had each earned an equal half of the income. Their tax liability is then determined by simply doubling the income tax due on one half.

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As people who earn more pay higher taxes in Germany, this system benefits couples where one partner (and often this is still the man) earns significantly more than the other (in practice often the woman).

Lars Klingbeil
Lars Klingbeil thinks spousal splitting is outdated and costs the state too muchImage: Bernd von Jutrczenka/dpa/picture alliance

Costs of up to €25 billion per year

If for example one partner earns €60,000 ($70,512) a year and the other partner earns nothing, the couple will be taxed as if they earned €30,000 each. In this example, the couple would save nearly €5,800 in taxes per year compared to the amount they would owe if both partners filed their taxes separately. According to the Finance Ministry, spousal tax splitting costs the government a total of up to €25 billion annually.

Some critics have long viewed splitting as a tool to keep women out of the labor market, because the more a woman earns, the larger her tax burden becomes. Klingbeil seems to agree, arguing on ARD television in late March that the system was “out of step with the times.” The spousal splitting system reflects “a view of women and families that is completely at odds with my own,” he said.

Chancellor Merz said to be in favor of splitting

On Monday of this week, Klingbeil got some surprising support on this from Johannes Winkel, head of the youth wing of the conservative Christian Democratic Union (CDU).

“Given the demographic reality, the government should create incentives to ensure that both partners in a relationship are employed,” Winkel told the Funke Media Group. “In the future, tax relief should primarily be granted to married couples when they are facing hardships related to raising children.”

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But the chancellor is a vocal skeptic of the proposal. “I am not convinced by the claim that joint filing for married couples discourages women from working,” Friedrich Merz said at a conference organized by the Frankfurter Allgemeine Zeitung newspaper. “Marriage is a relationship based on shared income and mutual support. And in a marriage, income must be treated as a joint income for tax purposes, not separately.”

Berlin under pressure to fix pensions, health care and taxes

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Klingbeil’s alternative plan

At around 74%, the labor force participation rate for women in Germany is one of the highest in Europe, but half of them work part-time.

Klingbeil’s idea is to replace the existing system with a more flexible approach: Both partners would be able to distribute tax-free income among themselves in such a way that it minimizes their tax liability. This would allow the couple to continue enjoying a tax advantage, albeit not to the same extent as before. And whether one partner earns more than the other would become less important.

However, it remains to be seen whether Klingbeil will be able to push through his proposal. Aside from Germany, similar regulations offering tax benefits to couples exist in Poland, Luxembourg, Portugal and France.

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This article was originally written in German.

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Finance

Departing inspector general targets Council Office of Financial Analysis

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Departing inspector general targets Council Office of Financial Analysis

The $537,000-a-year office created in 2014 to advise the City Council on financial issues and avoid a repeat of the parking meter fiasco has failed to deliver on that mission, the city’s chief watchdog said Tuesday.

Days before concluding her four-year term, Inspector General Deborah Witzburg said a shortage of both adequate staff and financial information closely held by the mayor’s office prevents the Council’s Office of Financial Analysis from helping the Council be the the “co-equal branch of government” it aspires to be.

In a budget rebellion not seen since “Council Wars” in the 1980s, a majority of alderpersons led by conservative and moderate Democrats rejected Mayor Brandon Johnson’s corporate head tax and approved an alternative budget, including several revenue-generating items the mayor’s office adamantly opposed.

But Witzburg said the renegades would have been in an even better position to challenge Johnson if only their financial analysis office had been “equipped and positioned to do what it’s supposed to do” — provide the Council with “objective, independent financial analysis.”

“We are entering new territory where the City Council is asserting new, independent authority over the budget process. It can’t do that in a meaningful way without its own access to financial analysis,” Witzburg told the Chicago Sun-Times.

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Chicago Inspector General Deborah Witzburg’s latest report focuses on the Chicago City Council’s Office of Financial Analysis.

Jim Vondruska/Jim Vondruska/For the Sun-Times

But the Council’s financial analysis office, she added, “has never been equipped or positioned to do what it needs to do. It needs better and more independent access to data, and it needs enough staff to do its job. It has a small number of employees and comparatively limited access to data.”

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The inspector general’s farewell audit examined the period from 2015 through 2023. During that time, the financial analysis office budget authorized “either three or four” full-time employees. It now has a staff of five .

Witzburg is recommending a staffing analysis to identify how many people the financial office really needs — and also recommending that the office “get data directly” from other city departments, “ rather than having it go through the mayor’s office.”

The audit further recommends that the office develop “better procedures to meet their reporting requirements” in a timely manner. As it stands now, reports are delivered “sometimes late, sometimes not at all,” the inspector general said.

“We find that those reports have been both not timely and not complete in terms of what they are required to report on and that those reports therefore have provided limited assistance to the City Council in its responsibility to make decisions about the city’s budget,” she said.

The Council Office of Financial Analysis responded to the audit by saying it hopes to add at least three full-time staffers in the short term and has made “some progress” over the last three years in improving their access to data, but not enough.

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The office was created in 2014 to provide Council members with expert advice on fiscal issues.

For nearly two years the reform was stuck in the mud over whether former 46th Ward Ald. Helen Shiller had the independence and policy expertise to lead the office.

Shiller ultimately withdrew her name, but the office was a bust nevertheless. In an attempt to breathe new life into it, sponsors pushed through a series of changes.

Instead of allowing the Budget chair alone to request a financial analysis on a proposal impacting the city budget, any alderperson was allowed to make that request.

The office was further required to produce activity reports quarterly, not just annually.

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Now former-Budget Chair Pat Dowell (3rd) then chose Kenneth Williams Sr., a former analyst for the office, as director and gave him the “autonomy” the ordinance demanded.

Two years ago, a bizarre standoff developed in the office.

Budget Committee Chair Jason Ervin (28th) was empowered to dump Williams after Williams refused to leave to make way for a director of Ervin’s own choosing.

The standoff began when Williams said he was summoned to Ervin’s office and told the newly appointed Budget chair was “going in a different direction, and I’m putting you on administrative leave” with pay.

“He took all my credentials and access away. I would love to come to work. I wasn’t allowed to come to work,” Williams said then.

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Williams collected a paycheck for doing nothing while serving out the final days remainder of a four-year term.

Ervin’s resolution stated the director “may be removed at any time with or without cause by a two-thirds” vote or 34 alderpersons. He chose Janice Oda-Gray, who remains chief administrator.

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Finance

Reilly Barnes Returns to Little League® as Purchasing/Finance Assistant

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Reilly Barnes Returns to Little League® as Purchasing/Finance Assistant

Little League® International has announced that Reilly Barnes accepted a new role as Purchasing/Finance Assistant, effective April 6, 2026. Barnes transitions from a temporary Purchasing Assistant to this full-time position to assist in the year-round demands of purchasing for the organization, as well as the region and Little League Baseball and Softball World Series tournaments. 

“We are thrilled to welcome back Reilly to our team as a full-time Purchasing/Finance Assistant. Reilly’s prior experience, time management, and attention to detail make him an invaluable asset to the purchasing team,” said Nancy Grove, Little League Materials Management Director. “We look forward to the positive contributions he will have on our organization.” 

In this role, Barnes will be responsible for processing purchase requisitions, coordinating souvenir products, and tracking order fulfillment. He will also assist with evaluating suppliers, reviewing product quality, and negotiating contracts for effective operations.  

After most recently working as a Logistician Analyst at Precision Air in Charleston, South Carolina, Barnes, a Williamsport native, returns after honing his skills in the fast-paced environment. Prior to his time at Precision Air, Barnes served as a Procurement Specialist at The Medical University of South Carolina, where his expertise and knowledge were instrumental in supporting both education and healthcare needs.  

“I am thrilled to return to Little League in this full-time role,” said Barnes. “Coming back to my hometown and having the opportunity to work for an organization that has played such a special part of my upbringing means a lot. I can’t wait begin this new opportunity.” 

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Barnes graduated from the University of Pittsburgh in 2022 with a B.A. in Supply Chain Management, Finance, and Business Analytics.  

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