Budget 2024: Explaining 10 Key Budget Terms Every Taxpayer Should Know
As India’s Finance Minister Nirmala Sitharaman set to present the interim budget on February first, people in the tax-driven economy of India are eagerly looking for the favourable changes. Here decodes the complex terms used generally in the Budgets. As a common man, it is essential to know how the taxes you are paying are processed. This article will help the reader understand the Budget jargon
Tax deduction
The tax deduction refers to the discount on your tax bill. For example, a standard deduction of Rs 50,000 lowers your total income, reducing the taxable amount. If you invest in the Public Provident Fund (PPF), National Saving Certificate (NSC) and tax-saving Fixed Deposit (FD), you can avail the discount on your tax under section 80C, up to Rs 1,50,000.
Rebate
Rebate is the reduction in total income tax aimed at reducing the burden of taxpayers and stimulating economic activity. Taxpayers get a refund on their income tax
Tax surcharge
A tax surcharge is an extra tax applied to the existing tax rate and will apply only to higher-income earners who earn more than Rs 50 Lakh. For example, if you have an income of Rs. 1 crore on which the tax is Rs. 3,00,000, the surcharge would be 10% of your tax, 30,00,000.
Cess On Tax
Cess is an additional tax levied by the government to raise funds for specific objectives such as health and education. This is charged on the total tax liability, including surcharge and is currently at 4 per cent.
New Tax regime
Introduced in 2022 by the government, the new tax regime has seven income tax slabs with concessional rates. In the financial year 2023-24, it became the default regime, replacing the old tax regime.
Old tax regime
The old tax regime which was replaced by the new one had four income tax slabs with the highest tax rate at 30 percent for incomes above ₹10 lakh.
TDS (Tax Deducted at Source)
This is the process of deducting tax at the origin or source of income. Tax is deducted by the payer and is remitted to the Government by the payer on behalf of the payee.
Tax saving instruments
Tax saving instruments are options such as PPF, NSC and National Pension Scheme (NPS), allowing taxpayers to claim a tax deduction in their investment
Tax collection at source (TCS)
It is an additional rate collected as tax by a seller from the buyer at the time of sale and the amount will be deposited with the tax authority
Virtual Digital Assets (VDAs)
Introduced in 2022, this includes digital currencies like Bitcoin, Ethereum, and Dogecoin. These digital assets come under a tax framework with a 1 per cent TDS on sales and purchases and a 30 per cent tax on capital gains.
