Sweeping changes in direct taxes gave the urban middle class plenty of reason to cheer, but also hit the wallets of others. The clear plus is in the form of an increase in standard deduction under the new regime for salaried employees from Rs 50,000 to Rs 75,000, which saves Rs 7,500 a year for those with annual incomes of Rs 10 lakh or more.
Tax slabs have also been changed for those under the new regime, which is about two-thirds of all income taxpayers.The 5% rate will apply from Rs 3 lakh to Rs 7 lakh rather than Rs 6 lakh at present. Similarly, the 10% rate kicks in at Rs 10 lakh instead of Rs 9 lakh. The result is a saving of a further Rs 10,000 for those with annual incomes of Rs 10 lakh or more. Those opting for the old regime will not get any of these.
Tax slabs have also been changed for those under the new regime, which is about two-thirds of all income taxpayers.The 5% rate will apply from Rs 3 lakh to Rs 7 lakh rather than Rs 6 lakh at present. Similarly, the 10% rate kicks in at Rs 10 lakh instead of Rs 9 lakh. The result is a saving of a further Rs 10,000 for those with annual incomes of Rs 10 lakh or more. Those opting for the old regime will not get any of these.
Changes in the taxation of capital gains, on the other hand, could cost the middle class. For one, short-term gains on equities will be taxed at 20% instead of 15%. Capital gains from sale of property held for two years or more will be taxed at 12.5% instead of 20%, but the gains will no longer be indexed to inflation, which means the bill could be higher despite the lower rate.
Beyond the rates, one relief for taxpayers is that an assessment can no longer be reopened beyond three years from the end of the assessment year unless the income that has escaped from the tax net exceeds Rs 50 lakh. Even where this cap is exceeded, it can only be reopened within five years.
