Money-Wise: Here’s how TDS changes in Indian Budget 2024 will impact your salary, mutual fund investments

Are you a salaried professional who is now calculating how much you will benefit from the revisions proposed in the Tax Deducted at Source(TDS) rates in the Budget 2024 by India's Finance Minister Nirmala Sitharaman and wondering if your decision to make investments in mutual funds was right or not?

The TDS changes introduced in Union Budget 2024 are significant and are likely to have an impact on the salaried class. So, let's try to understand what exactly are the changes and will it rattle or secure the working class' personal pockets.

In Salaries

The salaried employees have now been empowered to claim credit for Tax Collected at Source (TCS) against the deduction of TDS on their salaries. What does this mean?

TCS, which stands for the tax collected at source, is paid by the buyer to the seller and is then deposited with the tax authorities. This is collected on specific goods/services.

Also Read:Money-Wise: Planning to redeem your mutual fund units? What every Indian investor should know

TDS, which stands for the tax deducted at source, is the tax deducted by those making payments - in this case the employer - in advance for the payments to be made to you. The employer deducts TDS on the basis of the tax slab, the tax-exempted investments made by you and any other income.

Now, all the employees can claim the TCS paid by them to the employers and directly reduce the TDS amount to be deducted by the employer from the salary.

Also, if a refund is due because of the TCS, it will be adjusted against TDS on the income of the individual taxpayer.

In Mutual Funds

In the case of the mutual funds, the 20 per cent TDS which was charged on the repurchase of units by UTI (Unit Trusts of India) or mutual funds has been withdrawn.

Before October 1, 2024, 20 per cent TDS was levied on the mutual fund redemptions and this amount was deducted at the source before the rest of the money was transferred to the investor.

After October 1, 2024, the people investing in the mutual funds will not face any such deduction and the entire redemption amount, after deducting the expense ratio, will be credited to them. However, they will be required to pay capital gains tax on the profit made in their income tax return.

Watch:Budget 2024: Post-budget, Rupee crashes to a record low, Indian stocks tank

While removing TDS on the repurchase of units, the TDS on long-term capital gains, which is more than Rs. 1.25 lakh, has been increased from 10 per cent to 12.5 per cent.

Also, there has been an increase in the LTCG tax rate for all financial and non-financial assets from 10 per cent to 12.5 per cent. On some specific financial assets, the Higher Short-Term Capital Gains (STCG) tax has been revised from 15 per cent to 20 per cent.

So, it's not all good news for mutual fund investors, who may save some part of their pocket but are likely to lose part of their profits, especially if they have a large profit share.