Crypto Tax News- 10 Major Tax Reforms in India’s Union Budgets That Have Transformed Taxation
Crypto Tax News– Union Finance Minister Nirmala Sitharaman is set to present the Union Budget for 2025 today, marking her eighth consecutive Budget presentation, including the interim Budget in 2024. Over the years, the government has introduced several important tax reforms aimed at simplifying the taxation process, improving compliance, and addressing the needs of both individual taxpayers and the economy at large.
Here’s a detailed overview of key tax reforms introduced in recent Union Budgets that have had a significant impact on taxpayers:
1. Introduction of the New Tax Regime (Budget 2020)
In the 2020 Union Budget, the government introduced an optional new tax regime that provided lower tax rates compared to the old tax system. However, the new system came with the condition that certain tax deductions and exemptions, such as those on home loan interest and investments under sections like 80C, would be removed. The aim was to simplify the tax filing process and make the system more efficient. This move allowed taxpayers to choose between the new regime with reduced rates or the older one with deductions.
2. New Tax Regime Becomes Default (Budget 2023)
In 2023, the government made the new tax regime the default structure for taxpayers, though individuals were still given the option to revert to the old system if they preferred. This change was a significant shift, as it meant that most taxpayers would automatically fall under the new regime, encouraging a simpler and more transparent tax system.
3. Capital Gains Tax Adjustments (Budget 2024)
The 2024 Budget brought significant adjustments to the capital gains tax structure:
- Short-term Capital Gains (STCG): The tax rate on short-term financial assets was increased from 15% to 20%.
- Long-term Capital Gains (LTCG): A uniform 12.5% tax rate was introduced for both financial and non-financial assets, replacing the previous rate of 20%. Additionally, the exemption threshold for capital gains on certain listed assets was raised from Rs 1 lakh to Rs 1.25 lakh per annum. These changes aimed to bring more clarity and fairness to the taxation of capital gains.
4. Revised Timeframe for Assessment Reopening (Budget 2021)
In the 2021 Budget, the government reduced the timeframe for reopening income tax assessments from six years to three years. However, in cases of suspected tax evasion involving amounts over Rs 50 lakh, assessments could still be reopened for up to 10 years. This reform aimed at reducing the uncertainty for taxpayers while maintaining provisions to combat serious tax evasion.
5. Higher Standard Deduction (Budget 2024)
A notable change in the 2024 Budget was the increase in the standard deduction for salaried employees under the new tax regime. The standard deduction was raised from Rs 50,000 to Rs 75,000, which benefited many individuals by reducing their taxable income. Additionally, the deduction for family pensions was increased from Rs 15,000 to Rs 25,000, providing further relief to taxpayers.
6. Revised Tax Slabs (Budget 2024)
The 2024 Budget introduced a revised tax slab system under the new tax regime:
- No tax on income up to Rs 3 lakh
- 5% tax on income between Rs 3-7 lakh
- 10% tax on income between Rs 7-10 lakh
- 15% tax on income between Rs 10-12 lakh
- 20% tax on income between Rs 12-15 lakh
- 30% tax on income above Rs 15 lakh
These changes aimed to provide more tax relief to individuals with lower and middle incomes, while ensuring that higher-income earners paid a proportionately higher tax.
7. Higher Rebate Limit (Budget 2023)
In the 2023 Budget, the government raised the tax rebate limit under the new tax regime from Rs 5 lakh to Rs 7 lakh. This increase in the rebate threshold allowed individuals with income up to Rs 7 lakh to avoid paying taxes, thus providing a significant relief for lower-income earners.
8. Reduction in the Surcharge for High-Income Earners (Budget 2023)
The 2023 Budget also saw a reduction in the surcharge for high-income earners. The highest surcharge on incomes exceeding Rs 5 crore was reduced from 37% to 25%, making it more favorable for individuals in the top income brackets. This move aimed at encouraging investment and improving the overall tax environment for high earners.
9. Updated Income Tax Return Provision
A new provision introduced in recent years allows taxpayers to submit an updated income tax return within two years of the end of the relevant assessment year. This provision provides taxpayers an opportunity to correct any errors or omissions in their initial returns, improving accuracy and compliance with tax laws.
10. Tax on Cryptocurrency and Digital Assets (Budget 2022)
In a move to regulate the growing digital economy, the 2022 Budget imposed a 30% tax on earnings from virtual digital assets (VDAs) such as cryptocurrencies. In addition, a 1% TDS (Tax Deducted at Source) was introduced on transactions involving VDAs. This marked a significant step in bringing digital assets under the formal tax net, ensuring greater transparency and accountability in the digital economy.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.
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