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<ul class="summary-list"><li>Four therapists shared what their clients from different tax brackets discuss in sessions.</li><li>Money can be a source of stress for both those on lower incomes as well as the <keyword id="20766455" type="General" weightage="20" keywordseo="ultra-rich" source="keywords">ultra-rich</keyword>. </li></ul>We may think getting that big promotion with a hefty pay rise would solve all our problems, but would it? As Business Insider learned from interviewing therapists with clients across the socioeconomic spectrum —from <a target="_blank" class="" href="https://www.businessinsider.com/alices-dinks-henrys-fires-economy-guide-2024-6">ALICEs to HENRYs</a> and beyond — while it's easy to see why having a low income can cause stress — particularly with <a target="_blank" class="" href="https://www.businessinsider.com/wealth-inequality-so-bad-will-take-230-years-end-poverty-2024-1">growing wealth inequality</a> — rich people have their own worries. So what are people across the tax brackets discussing with their therapists? <h2>People on low incomes</h2>Anna Nathanson, a licensed clinical social worker and therapist based in New York, runs a website called Low-Cost Therapy NYC. She said that "financial instability really eats at people's souls." It affects not only people's physical well-being but also their interpersonal relationships and self-worth, which is linked to money for many. Clients might talk about <a target="_blank" href="https://www.businessinsider.com/personal-finance/rules-spender-saver-relationship-build-wealth-2021-9">arguing about money with their partner</a>, job hunting, having to rely on friends for childcare, or how their income affects their self-esteem, Nathanson said. She has also helped patients work through chronic trauma responses, such as depression or nightmares, that they have developed from repeatedly not having their basic needs met. <div type="image" title="A couple sat, arguing." height="1414" width="2121" msid="114215104" hostid="261"></div>Dr. Ashley Castro, a New York-based clinical psychologist who started Healwise, an affordable and accessible therapy nonprofit, said: "Poverty brings with it so many different kinds of stress." She added: "There is a lot that's out of their control that can be difficult emotionally. It's just a reality that life can be tough if you don't have a lot of money." <h2><keyword id="23623471" type="General" weightage="20" keywordseo="ALICEs" source="keywords">ALICEs</keyword></h2><a target="_blank" href="https://www.businessinsider.com/alice-living-paycheck-to-paycheck-without-government-assistance-snap-medicaid-2024-5">ALICEs</a> (Asset Limited, Income Constrained, Employed) are people who earn enough to sit above the federal poverty line but struggle with the cost of living. <div type="image" title="A birds-eye view of a woman typing on a calculator and looking at her bills" height="1414" width="2121" msid="114215097" hostid="261"></div>Traci Williams, a psychologist and certified financial therapist in Atlanta, said that people with little money can end up overspending and getting into debt because they might be "trying to live a life that they desire for themselves that they cannot yet afford." On the other hand, people who have become ALICEs — for instance those who have lost wealth or grew up in financially stable homes butdon't make as much as their parents — may develop <a target="_blank" href="https://www.businessinsider.com/personal-finance/money-anxiety-scarcity-mindset-generational-trauma-2022-6">scarcity mindsets</a>, Williams said. As such, while some ALICEs will discuss in therapy their need to hoard money others talk about wanting to "live it up" and spend recklessly when they are able, she said. <h2>HIFIs</h2><a target="_blank" href="https://www.businessinsider.com/americans-feel-financially-insecure-wont-stop-luxury-shopping-millennials-genz-2024-5">HIFIs</a> (<keyword id="23623474" type="General" weightage="20" keywordseo="high-income" source="keywords">High Income</keyword>, Financially Insecure) earn a high salary, but spend so much they end up living paycheck to paycheck. Just over half of people who make $100,000 or more live paycheck to paycheck, a 2023 report by PYMNTS, a data-analytics company, and LendingClub, a financial-services company, found. <div type="image" title="A woman in a green jumper, looking out a window and away from her phone." height="1086" width="1629" msid="114215098" hostid="261"></div>"That is not because they don't have enough, but it's often because they are overspending or not financially aware," Williams said. This may be due to the <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/what-causes-inflation">increased cost of living</a>, which has contributed to many people's <keyword id="22941859" type="General" weightage="20" keywordseo="financial-insecurity" source="keywords">financial insecurity</keyword>, she said. Many of Williams' clients say they also feel pressured to spend above their means in order to keep up with the lifestyles of their peers that they see on social media. <h2><keyword id="23623470" type="General" weightage="20" keywordseo="HENRYs" source="keywords">HENRYs</keyword></h2>Some <a target="_blank" href="https://www.businessinsider.com/henry-student-loans-six-figure-income-millennial-gen-z-retirement-2023-11">HENRYs</a> (High Earners, Not Rich Yet) might seem wealthy to others, but still worry about having enough money, Williams said, because "it's all relative." She gave the example of higher-earning clients who <a target="_blank" href="https://www.businessinsider.com/personal-finance/investing/how-to-invest-in-stocks">invest in stocks</a> and worry markets could crash at any time, despite that being unlikely. <div type="image" title="A stressed men looking a stock market graph on a laptop." height="1414" width="2121" msid="114215100" hostid="261"></div>HENRYs who didn't grow up with much money might tell Nathanson that they feel guilty being wealthy, she said. They might also talk about feeling uncomfortable receiving gifts because they don't feel deserving, she said. Or they may feel the reverse and have an unnecessary scarcity mindset. Such people often talk to Nathanson in therapy about feeling "really <a target="_blank" href="https://www.businessinsider.com/young-people-are-developing-money-dysmorphia-2024-7">nervous about spending</a> anything and feeling like they can't indulge in any way." Two HENRYs in a couple, meanwhile, might want to discuss tension in their relationship if they have different ways of thinking about shared wealth, she said. <h2>Ultra-high net worth individuals</h2>"The stereotype is that rich people problems aren't real problems, that they're just in therapy talking about really inconsequential trivial things," Castro said. "But my patients have real issues and they genuinely struggle." Dr. Paul L. Hokemeyer, a licensed marriage and family therapist and clinical consultant to <a target="_blank" href="https://www.businessinsider.com/what-ultra-high-net-worth-investors-are-buying-family-office-2024-6">ultra-high net-worth people</a>, based in Colorado, agreed with Castro. "At the core, people of wealth suffer from the same mental health and relational issues as the rest of humanity," he said. <div type="image" title="A man and woman sit far apart in a fancy apartment." height="1414" width="2121" msid="114215106" hostid="261"></div>For example, Hokemeyer helps people who feel "objectified" and "vilified" because of their wealth; who feel pressure to use it in productive ways; and who deal with the "highly stressful and chaotic" process of starting a business. Well-off children and teens, meanwhile, must often deal with the expectation that they will get into <a target="_blank" class="" href="https://www.businessinsider.com/extreme-moves-gifts-parents-use-get-kids-into-prestigious-preschools-2020-6">elite educational institutions</a> with intense workloads, Castro said. The pressure to achieve can cause problems with perfectionism and anxiety disorders, as well as depression from a lack of downtime and fun. Williams said that she sees a lot of guilt and hopelessness in her wealthier clients, because they realize they can't make as big a difference in the world as they would like to. And, as people live longer, she said that some worry about not having enough money to sustain their lifestylesas they get older. Wealth can also cause issues within families, she said, with disagreements over wills, estates, and spending on vacations. According to Hokemeyer, "wealth can be both a blessing and a curse," but, at the end of the day, "emotions are emotions, pain is pain." Correction: October 16, 2024 — An earlier version of this story misspelled the first name of a psychologist and financial therapist in Atlanta. Her name is Traci Williams, not Tracy. An earlier version also misstated the name of a financial-services company. It’s LendingClub, not LendingCompany.

From ALICEs to HENRYs, here's what people across the tax brackets discuss in therapy

The government has officially announced October 1, 2024, as the starting date for <keyword id="23245808" type="General" weightage="100" keywordseo="Vivad-Se-Vishwas-2-0" source="keywords">Vivad Se Vishwas 2.0</keyword>, the direct tax dispute resolution scheme. If you're involved in a tax dispute, this scheme might be your chance to resolve it efficiently. Originally introduced during the 2024-25 Union Budget, the scheme is designed to handle <keyword id="22518437" type="General" weightage="20" keywordseo="income-tax-disputes" source="keywords">income tax disputes</keyword> that are currently tied up in appeals. Confirming the news, the <keyword id="19900485" type="General" weightage="20" keywordseo="Finance-Ministry" source="keywords" meta.keywordsubtype="org" meta.entityname="Finance Ministry" meta.hostid="261" meta.entityid="Finance Ministry">finance ministry</keyword> said in its notification: "The central government hereby appoints the 1st day of October, 2024 as the date on which the Direct Tax Vivad Se Vishwas Scheme, 2024 shall come into force." <h2>The scope of the disputes</h2>To give you an idea of the scale, about 2.7 crore direct tax demands are currently being contested, amounting to a staggering Rs 35 lakh crore. These disputes are scattered across various legal forums, and Vivad Se Vishwas 2.0 aims to help clear this backlog. <div type="Article" hostid="261" msid="113444994" title="In the long run, rate cut by Fed will be favourable for most US banks: Moody&amp;#39;s" mstype="2" mssubtype="0"></div>In her Budget speech, <keyword id="19912360" type="General" weightage="20" keywordseo="Finance-Minister-Nirmala-Sitharaman" source="keywords">Finance Minister Nirmala Sitharaman</keyword> highlighted the government’s dedication to simplifying taxes and minimising litigation. She said, "The government will continue its efforts to simplify taxes, improve <keyword id="20404572" type="General" weightage="20" keywordseo="taxpayer-services" source="keywords">taxpayer services</keyword>, provide tax certainty and reduce litigation while enhancing revenues." <h2>Who can avail the scheme?</h2>If you have any pending disputes or appeals, including writs and special leave petitions, whether filed by you or the tax authorities, as of July 22, 2024, you are eligible to take advantage of this scheme. The list of eligible cases includes those pending before the Supreme Court, high courts, Income Tax Appellate Tribunal, and Commissioner/Joint Commissioner (Appeals). It also covers cases before the Dispute Resolution Panel (DRP) and revision petitions awaiting a decision from the Commissioner of Income Tax. <div type="Article" hostid="261" msid="113417255" title="Individuals earning over Rs 10 cr rise by 63% in India; financial assets of high net worth individuals to nearly double by 2028" mstype="2" mssubtype="0"></div>However, the window to decide whether or not to participate in the scheme is limited. As Karishma R. Phatarphekar, Partner at <keyword id="20006170" type="General" weightage="20" keywordseo="Deloitte-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Deloitte India" meta.hostid="261" meta.entityid="Deloitte India">Deloitte India</keyword>, said: "Given the limited time window, an informed decision on opting for the scheme should be made promptly." The rules and forms for the scheme are expected to be published "imminently in the coming week." <h2>Success of the original Vivad Se Vishwas</h2>For those who are wondering about the potential impact, the first Vivad Se Vishwas scheme, introduced in 2020, resolved a significant number of cases. More than 1 lakh taxpayers participated, and the government collected about Rs 75,000 crore in taxes. With this track record, the expectations from Vivad Se Vishwas 2.0 are high. With October 1 just around the corner, now is the time to prepare if you are considering resolving your tax dispute through Vivad Se Vishwas 2.0. As the rules and forms are expected shortly, it’s wise to consult your <keyword id="23245810" type="General" weightage="20" keywordseo="tax-advisor" source="keywords">tax advisor</keyword> and make a decision soon. This scheme could provide the relief you’ve been waiting for while contributing to a more efficient tax system for all. (With inputs from PTI)

New Vivad Se Vishwas 2.0 tax resolution scheme to start on Oct 1 — what you need to know

<ul class="summary-list"><li>Trump wants to cut taxes on Social Security benefits, impacting current and future beneficiaries.</li><li>Experts warn these cuts could deplete the Social Security fund three years earlier than expected.</li></ul>Donald Trump plans to make changes to America's Social Security system with his return to the White Housein January. The president-elect promised on the campaign trail to <a target="_blank" class="" href="https://www.businessinsider.com/trumps-tax-plan-social-security-retirement-medicare-2024-8">cut taxes on Social Security benefits</a> in his second term. "People on Social Security are being killed, and one of the things I'm doing is no tax for seniors on Social Security, and I'll get it done quickly," Trump told "Fox &amp; Friends" in August. For some baby boomers, lower <a target="_blank" class="" href="https://www.businessinsider.com/retirement-savings-social-security-baby-boomers-without-savings-401k-poverty-2024-8">Social Security</a> taxes could mean larger monthly checks in the short-term. But experts predict that the <keyword id="23944791" type="General" weightage="20" keywordseo="Social-Security-tax-cuts" source="keywords">Social Security tax cuts</keyword>, along with other campaign promises made by Trump, could quickly drain the national Social Security fund. That would put benefits at risk for low-income retirees and younger generations, who may <a target="_blank" class="" href="https://www.businessinsider.com/retirement-savings-social-security-baby-boomers-without-savings-401k-poverty-2024-8">rely on that income</a> as they age. "It's designed to help retirees, but the people it's going to hurt are people that rely on Social Security the most," Taylor Lee, a certified financial planner at Belmont Capital Advisors, told BI of Trump's Social Security tax cut. More than 72 million Americans receive Social Security and the estimated average monthly check is <a target="_blank" href="https://faq.ssa.gov/en-us/Topic/article/KA-01903">$1,92</a>4.35 a month, per the Social Security Administration. Americans can begin taking Social Security at age 62, or wait until their full benefits kick in at 67, the national retirement age. Trump's campaign promise comes as Business Insider has <a target="_blank" class="" href="https://www.businessinsider.com/older-americans-regret-retirement-savings-taking-social-security-early-investments-2024-10">heard from older adults</a> with limited retirement savings, many of whom are struggling to afford necessities like housing and groceries on their fixed Social Security income. Income taxes on Social Security apply to all beneficiaries with an annual household income above $25,000, and most pay taxes on at least <a target="_blank" href="https://www-origin.ssa.gov/benefits/retirement/planner/taxes.html">50%</a> of their benefits. Lower-income beneficiaries pay less in taxes. <h2>Social Security tax cuts would hurt low-income retirees, younger generations</h2>US Social Security will be depleted<a target="_blank" href="https://www.businessinsider.com/when-will-social-security-benefits-run-out-retirement-crisis-boomers-2024-5">in the next decade</a> without Congressional action. The fund is largely financed through payroll taxes that Americans contribute to throughout their career. <a target="_blank" href="https://www.crfb.org/blogs/what-would-trump-campaign-plans-mean-social-security">A report</a> published in October by the nonpartisan Committee for a Responsible Federal Budget said that Trump's campaign promises — which alsoincludes ending taxes on tips, reducing <a target="_blank" class="" href="https://www.businessinsider.com/trump-tax-plan-tarriffs-benefits-top-earners-study-2024-10">some income taxes</a>, expanding deportations, and imposing tariffs — would take a toll on the Social Security fund, making it "insolvent" within the next six years. That's three years earlier than the Congressional Budget Office's current estimation. Those policies would also lead to a 33% <a target="_blank" class="" href="https://www.crfb.org/blogs/what-would-trump-campaign-plans-mean-social-security">benefit cut</a> in 2035, a 10% increase from what the Congressional Budget Office projects under the current law. Lee said that low-income boomers and younger generations are likely to feel the brunt of these cuts. Low-income boomers living on Social Security already pay less income taxes, so they wouldn't see the benefits Trump promised. Lee said that many don't have other <a target="_blank" class="" href="https://www.businessinsider.com/social-security-no-savings-snap-benefits-debt-boomers-experiences-2024-6">retirement savings </a>to fall back on if their benefits are slashed. He added that older Americans who are wealthy or middle class would feel less stress from Social Security cuts, and may benefit in the short term from Trump's tax plan. "It would help people in the middle class, people that have the luxury of having a 401(k) or an IRA and have multiple sources of retirement income," Lee said. "But the people that's going to hurt the most are people that don't have that traditional retirement income." Lee said it's possible that <a target="_blank" class="" href="https://www.businessinsider.com/gen-z-social-security-insolvency-medicare-donald-trump-biden-mcconnell-2023-3">younger generations</a> will have lower Social Security benefits, requiring them to rely more heavily on retirement savings. To be sure, any changes Trump hopes to make the tax or Social Security systems would need to be approved by Congress. Working in his favor is that the<a target="_blank" class="" href="https://www.businessinsider.com/republicans-win-senate-election-majority-election-2024-11">Senate will have a Republican majority</a>.(Votes for House representatives are still being counted.) Lee added that tax funding is also not the only challenge facing Social Security: people are living longer, meaning that more benefits funding is required per person. As for other retirement finances, like <a target="_blank" href="https://www.businessinsider.com/personal-finance/investing/what-is-401k">401(k) accounts</a> and <a target="_blank" href="https://www.businessinsider.com/donald-trump-election-victory-impact-investments-costs-housing-taxes-childcare-2024-11">investments</a>, it's unclear what impact a second Trump term will have. The president-elect plans to impose tariffs on foreign goods and make broad tax cuts, a move that is likely to drive inflation and make the cost of living <a target="_blank" class="" href="https://www.businessinsider.com/trump-tariffs-higher-inflation-fed-interest-rates-taxes-mortgage-rates-2024-11">more expensive</a>. With the <keyword id="23944794" type="General" weightage="20" keywordseo="future-of-Social-Security" source="keywords">future of Social Security</keyword> uncertain, Lee said it's important for retirees to build a strong financial plan. "There's a lot of planning that we can still do," Lee said. "Government policy — we really can't affect that. So we just have to control what we can control." Are you relying on Social Security in retirement? Are you adjusting your retirement plans based on Trump's return to office? If so, reach out to this reporter at <a target="_blank" class="" href="mailto:allisonkelly@businessinsider.com">allisonkelly@businessinsider.com</a>.

Trump's plan for Social Security will help baby boomers in the short term and cut benefits for anyone younger

<ul class="summary-list"><li>Uber-rich business owners in high-tax states can save on income taxes without moving.</li><li>Instead of selling their businesses outright, they put their stock in a trust in a tax-haven state.</li></ul>Top earners continue to flock to states with little to no income tax such as <a target="_blank" href="https://www.businessinsider.com/where-rich-people-are-moving-florida-texas-tennessee-north-carolina-2024-1#:~:text=Wealthy%20people%20are%20moving%20to,even%20for%20the%20highest%20earners.">Florida and Texas</a>. It's an especially smart move if you're about to sell a business. As for rich entrepreneurs who aren't ready to make a move, they can still save on taxes with the right lawyer.By creating a special kind of trust, business owners can take advantage of the loose tax laws of other states. Instead of selling a business outright, they transfer their shares to an incomplete non-grantor trust set up in a <a target="_blank" href="https://www.businessinsider.com/us-states-tax-haven-billions-hidden-untaxed-wealth-assets-2022-9">tax-haven state</a> such as Nevada. When the shares are sold, the trust collects the proceeds without paying any state income or capital-gains taxes. The trust assets grow free of those taxes and are shielded from creditors.Dan Griffith of Huntington Bank expects ING trusts will surge in popularity with dealmaking on the rebound coinciding with a "silver tsunami.""You've got baby-boomer business owners who need to transition, and you also have a ton of capital on the sidelines looking for transactions," Griffith, Huntington's director of wealth strategy, said. "With more deals comes more need for tax-saving strategies."Investors can also benefit from putting their portfolios in ING trusts because that allows the dividends to grow free of state taxes. ING trusts are powerful tax-avoidance tools, so much so that New York and California have enacted laws to render them useless for state residents. California closed the loophole in 2023, estimating it would increase tax revenue by $30 million that year and $17 million each following year.Each state also has its own provisions to navigate, which makes setting up INGs cumbersome. However, Bank of America's Timothy Herbst said it could still be worth it in states without sky-high income-tax rates."That trust can grow conceivably without any state income tax," the wealth-strategy executive said. "That's a significant savings even in a state like North Carolina at 4.5%. It's not necessarily a huge income tax, but you look at a very large portfolio growing over decades, that can be real significant savings."<h2 id="a0857d85-806e-4e72-a9da-646cab9ef538">Here is how ING trusts work</h2>ING trusts come in different flavors. Nevada and Delaware are popular states for domiciling ING trusts, where they're referred to as "NINGs" and "DINGs," respectively. However, Wyoming and South Dakota are also options as they do not tax trust income or capital gains and protect trust assets from creditors.The person who creates the trust, otherwise known as the settlor, does not have to reside in that state, but the trust should be administered by a third party who does.Here's an example of how an ING trust can work.ING trusts are still subject to federal capital gains taxes, but the ultrawealthy users of INGs would likely be subject to that burden anyway. For a centimillionaire, it's not hard to reach the top rate of 37%, which applies to incomes above $578,126."These are superrich people," Bob Lord, a senior advisor on tax policy for the <a target="_blank" href="https://www.businessinsider.com/patriotic-millionaires-want-wealth-tax-congress-reconciliation-build-back-better-2022-7">Patriotic Millionaires</a>, said. "They're still taking in enough to get to the 37% bracket."Furthermore, INGs can be used to take advantage of a <a target="_blank" href="https://www.businessinsider.com/qsbs-qualified-small-business-stock-startups-criteria-taxes-2019-12">tax perk</a> for early shareholders that exempts at least $10 million in profits from the federal capital-gains tax. Steve Oshins, a Nevada lawyer, said founders could double their exemption by setting up an ING trust."This trust can serve as a second taxpayer so that the individual can get a second $10 million exemption," he said. "This can apply even if they don't live in a state with a state income tax."For the ING trust to pass muster with state authorities, there should be multiple beneficiaries in addition to the settlor and their spouse. Since beneficiaries do have to pay state income taxes — if applicable — when they receive distributions. For this reason, lawyers advise that clients take as few distributions as possible and let the assets grow in the trust for their children or future generations."It is usually better that the client knows that distributions won't be coming back to him or her or to their spouse," Herbst said. "If they did need those distributions, then it probably is not going to be the right strategy."That said, sometimes taking a distribution makes sense if there is financial need or the client has moved to a low-tax state since setting up the ING trust, Oshins said."You just have to look at each fact pattern on its own and make the right decision," he said.<h2 id="68a845c4-1176-4c9e-871e-cd1aab5eb265">Buyer beware</h2><ol><li>ING trusts can't be used to avoid state taxes on salaries or rental income.</li></ol>ING trusts cannot be used to defer income taxes on salaries or income from tangible assets in the state. That income, referred to as source income, is subject to state taxes.For instance, Griffith said, an Ohio resident cannot avoid state or local taxes on income from rental properties in the state even if they transfer ownership of the properties to an ING trust in South Dakota.For clients in states with aggressive tax authorities, Griffith recommends they step away from their business' day-to-day operations and collect a minimal salary before transferring their interests to the ING trust."What you really need to do is become essentially just a shareholder, be, as a business owner, somebody who says, 'I am just receiving dividends from this company. I own C-corp stock,'" he said. "In many states, that becomes non-source income."<ol start="2"><li>Setting up an ING trust is like threading a needle.</li></ol>These trusts have to be structured carefully to avoid <a target="_blank" href="https://www.businessinsider.com/real-estate-gift-tax-avoidance-trusts-wealth-planning-rich-inheritance-2023-5">triggering estate taxes of as much as 40%</a> while keeping the income-tax advantages. In addition to navigating the laws in the home state and the tax-haven state, the settlor has to retain certain rights and relinquish others. For instance, the settlor can't have the ability to compel distributions but should have the right to name beneficiaries at death."It's inherently complicated," Griffith said. "You've got to have a fairly sizable transaction to make the juice worth the squeeze."<ol start="3"><li>The trust has to be set up well before the business is sold.</li></ol>It is easier for a state tax authority to pursue income from the sale of a business if it is done shortly after the ING trust is established. Griffith recommends at least a year's delay, but it is the biggest challenge for clients, he said."They're like, 'Oh, I don't want to fund the trust until we know we're going to sell.'" he said. "You have to do it in advance. And if you do, those are the ones that I've seen that have been really successful."

This tactic to avoid income taxes without moving to Florida could surge thanks to a 'silver tsunami'

Today is <keyword id="22458495" type="General" weightage="20" keywordseo="July-31st" source="keywords">July 31st</keyword>, 2024, the last day to file your income tax returns, without having to pay any penalties. And before you ask, the <keyword id="19903456" type="General" weightage="20" keywordseo="income-tax-department" source="keywords">Income Tax Department</keyword> has not come out with any notification informing the taxpayers of a deadline extension. That is why you should not delay filing your <a href="https://www.businessinsider.in/personal-finance/article/heres-your-ready-reckoner-for-itr-filing/articleshow/111402608.cms" data-type="tilCustomLink">income tax returns</a> anymore! The <keyword id="20171597" type="General" weightage="20" keywordseo="IT-department" source="keywords">IT department</keyword> noted that as of July 26th, 2024, over 5 crore ITRs had already been filed, marking an 8.5% increase from the number of ITRs filed during this period, last year. The IT department, in an X post, highlighted that last year, it had reached the 5-crore <keyword id="22083160" type="General" weightage="100" keywordseo="ITR-filing-deadline" source="keywords">ITR filing deadline</keyword> on July 27th. However, this year, it had breached the milestone a day earlier, i.e., on July 26th, 2024. Earlier, the All Gujarat Federation of Tax Consultants and Income Tax Bar Association had requested a deadline extension for AY 2024–25 from July 31st, 2024, to August 31st, 2024, citing issues and glitches in the tax filing portal. However, there has been no response from the finance ministry on the same. <h2>What happens if I don't file my ITR until July 31st? </h2>For AY 2024–25, you can file a <keyword id="6380232" type="General" weightage="20" keywordseo="belated-ITR" source="Orion">belated ITR</keyword> until December 31st, 2024. But remember, it comes with many disadvantages as well. Here's a snapshot of all the benefits you will have to forego: <h2>What are the penalties for late filing of ITR? </h2>1. You will have to pay a penalty of Rs. 1,000 if your total annual taxable income is below Rs 5,00,000. But if your taxable income exceeds this threshold, you will have to pay a penalty of Rs 5,000. 2. Even if you have to file a <keyword id="17933087" type="General" weightage="20" keywordseo="NIL-ITR" source="Orion">nil ITR</keyword>, you must do so before July 31st. This is because if you do not end up filing it on time, you will have to pay a fine of Rs 1,000. 3. According to Section 234A of the <keyword id="19936187" type="General" weightage="20" keywordseo="income-tax-act" source="keywords">Income Tax Act</keyword>, you will also have to pay interest on your outstanding tax amount at the rate of 1% per month, starting from the due date, i.e., July 31st. <h2>No carry forward of losses, old tax regime</h2>1. You will not be able to carry forward any losses, including those from your mutual funds or stock investments, business income, and other sources. You will only be allowed to carry forward your losses from house properties. This could significantly raise your total tax liability and lead to you incurring hefty losses. 2. After July 31st, 2024, you will not be able to opt for the old tax regime for tax calculation purposes. Starting August 1, the new tax regime, which offers significantly fewer deductions and exemptions as compared to the old regime, will be considered default for you. Also read: <a href="https://www.businessinsider.in/personal-finance/article/decoding-form-16-how-do-you-file-your-taxes-if-you-dont-get-form-16/articleshow/111529754.cms" data-type="tilCustomLink">Decoding Form 16: How do you file your taxes if you don't get Form 16?</a> <a href="https://www.businessinsider.in/finance/tax/article/wondering-which-itr-form-is-right-for-you-know-all-about-it-here/articleshow/111406215.cms" data-type="tilCustomLink">Wondering which ITR form is right for you? Know all about it here</a>

ITR Filing: Today is the last day to file your income tax returns, so file today to avoid penalties

<ul class="summary-list"><li>The 2024 election will affect taxes, with key policy changes expected in 2025 no matter who wins.</li><li>Trump's plans could mean tax hikes for lower earners; Harris' proposals would target higher earners.</li></ul>Election Day is fast approaching, and no matter who wins, you'll probably see changes to your tax bill in 2025.In the fourth installment of BI's five-part series in the final stretch before the election, Business Insider is looking at the ways each candidate's policies could affect how much you pay in taxes. (Read <a target="_blank" rel="" class="" href="https://www.businessinsider.com/market-impact-presidential-election-scenarios-trump-harris-stocks-bonds-crypto-2024-10">part one</a> about investments, <a target="_blank" rel="" class="" href="https://www.businessinsider.com/cost-expensive-goods-price-impact-presidential-election-scenarios-trump-harris-2024-10">part two</a> about costs, and <a target="_blank" class="" href="https://www.businessinsider.com/housing-affordability-supply-impact-presidential-election-scenarios-homebuyers-harris-trump-2024-10">part three</a> about housing.)Each of the three sections below represents a key segment of the taxpaying population: low- and middle-income earners, high-income earners, and businesses. BI will unpack how a Trump or Harris presidency is expected to affect all three groups.<h2 id="340d6951-a382-4d10-927e-fbfb8a85b7a9">Low- and middle-income earners</h2>Under Trump's proposal, lower- and middle-income Americans could see some tax reductions, especially if they're trying to pay off a car or have a job that relies primarily on tips. Trump has proposed extending his slew of tax cuts from the Tax Cuts and Jobs Act of 2017 — also known as the "Trump tax cut." He's also seeking to eliminate taxes on <a target="_blank" class="" href="https://www.businessinsider.com/tax-tips-overtime-trump-proposals-income-money-election-2024-10">tips, overtime</a>, and <a target="_blank" class="" href="https://www.businessinsider.com/trumps-tax-plan-social-security-retirement-medicare-2024-8">Social Security benefits</a>, as well as making <a target="_blank" class="" href="https://www.businessinsider.com/trump-speech-detroit-new-car-loan-interest-tax-proposal-2024-10">car interest payments tax deductible</a>.Based on an analysis from the left-leaning Institute on Taxation and Economic Policy, keeping the income-tax cuts from the TCJA alone could mean a tax reduction of just over $1,000 for the middle 20% of Americans.But another part of Trump's tax policy — his plan to levy universal tariffs on all US imports — could end up undercutting this positive impact. Economic <a target="_blank" href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4834397">analyses</a> have found that those tariffs could offset the tax benefits and then some for lower-earning Americans.Factoring in the cost of tariffs, Trump's tax package could result in higher tax bills for everyone but the top 5%, the Institute on Taxation and Economic Policy <a target="_blank" href="https://www.businessinsider.com/trump-tax-plan-tarriffs-benefits-top-earners-study-2024-10">found.</a>"A lot of those tariffs do end up harming lower-income families and taxpayers who buy goods from abroad," Garrett Watson, a senior policy analyst at the right-leaning Tax Foundation, said.Harris has <a target="_blank" class="" href="https://www.businessinsider.com/jd-vance-expanded-child-tax-credit-proposal-pro-family-2024-8">proposed</a> an expanded earned-income tax credit aimed at lower-income earners, and she wants to restore and expand upon a more generous child tax credit, similar to the one implemented under Biden's pandemic-relief bill in 2021. The <a target="_blank" href="https://taxpolicycenter.org/taxvox/key-harris-tax-credits-would-largely-benefit-low-and-middle-income-households">Tax Policy Center estimates</a> that Harris' proposals could bring down household taxes by an average of $750 — with the lowest-income earners seeing their after-tax incomes grow the most.Harris' and Trump's proposals share some key similarities: Both have proposed some version of eliminating taxes on tips. While Harris hasn't outlined specifically what she'd preserve from the TCJA, she's maintained Biden's promise not to raise taxes on those making below $400,000. The Trump campaign has also shown <a target="_blank" class="" href="https://www.businessinsider.com/jd-vance-expanded-child-tax-credit-proposal-pro-family-2024-8">interest in bolstering the child tax credit</a>.<h2 id="cbdc640e-2340-4bd9-af1d-48c2bab5e227">High-income earners</h2>If Trump makes all the TCJA's income-tax provisions permanent, middle-income Americans would get a tax break of about $1,000, while the top 0.1% of earners would see a cut of nearly $280,000, a <a target="_blank" href="https://taxpolicycenter.org/taxvox/those-making-450000-and-would-get-nearly-half-benefit-extending-tcja">Tax Policy Center analysis</a> found.Another boon for wealthy Americans would be an extension of the break in estate taxes. The TCJA <a target="_blank" class="" href="https://www.businessinsider.com/bernie-sanders-is-targeting-wealthy-with-two-new-tax-measures-2021-3">doubled</a> the amount of inherited wealth that could be considered tax-exempt, from around $5.5 million in 2017 to around <a target="_blank" class="" href="https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax">$11.2 million in 2018</a>.Trump has <a target="_blank" href="https://truthsocial.com/@realDonaldTrump/posts/113154156175795473">floated</a> lifting the $10,000 cap on the State and Local Tax deduction, known as SALT, from his 2017 tax bill. SALT mostly impacts affluent taxpayers in blue states with high local taxes, and a repeal of the cap would restore a tax break mostly enjoyed by higher earners in places like California, New Jersey, and New York, said Benjamin Page, a senior fellow at the Urban-Brookings Tax Policy Center.Harris' tax proposals target higher earners to help offset costs — if the TCJA were to expire for taxpayers making over $400,000, the top marginal rate would increase from <a target="_blank" href="https://www.brookings.edu/articles/which-provisions-of-the-tax-cuts-and-jobs-act-expire-in-2025/#:~:text=For%20example%2C%20the%20TCJA%20cut,levels%20if%20the%20TCJA%20expires.">37% to 39.6%</a>. She also supports two measures that have gained traction during the Biden administration: targeting ultrawealthy investors' capital gains and imposing a minimum income tax on billionaires."Unlike the Trump campaign, the other shoe for the Harris-Walz campaign comes on the high end," Ernie Tedeschi, the director of economics at the Yale Budget Lab and the former chief economist at the White House Council of Economic Advisers, said.Harris has proposed bumping the tax on <a target="_blank" href="https://www.businessinsider.com/what-is-capital-gains-tax-2018-8">capital gains</a> for Americans making $1 million or more from 20% to 28%. That would mean a higher tax rate on the money wealthy Americans make when they sell off assets like real estate or stocks — a <a target="_blank" href="https://www.businessinsider.com/capital-gains-taxes-hike-rate-over-1-million-brian-deese-2021-4">key source of income</a> for more affluent taxpayers.Harris also supports a minimum income tax for billionaires, a proposal <a target="_blank" href="https://www.businessinsider.com/biden-billionaire-income-tax-could-look-like-withholding-on-paychecks-2022-3https://www.businessinsider.com/biden-billionaire-income-tax-could-look-like-withholding-on-paychecks-2022-3">Biden has touted</a>. She hasn't released specifics on what that would look like.<h2 id="a4c38432-f9ca-4a2d-ab93-24e1a7b76af9">Big- and small-business owners</h2>Harris wants to bump up the corporate tax rate from <a target="_blank" href="https://kamalaharris.com/wp-content/uploads/2024/09/Policy-Book-Economic-Opportunity.pdf">21% to 28%</a>, while Trump has proposed lowering it from <a target="_blank" href="https://www.crfb.org/blogs/donald-trumps-proposal-lower-corporate-tax-rate-15">21% to 15%</a> for firms that make their products in the US.Harris has <a target="_blank" href="https://www.businessinsider.com/state-taxes-deductions-salt-relief-house-republicans-bill-2023-7">proposed</a> some specific breaks for small businesses. Her key proposals include beefing up the startup deduction for new businesses from $5,000 to $50,000, creating a standard deduction for small businesses, and incentivizing local governments to ease up red tape, such as <a target="_blank" class="" href="https://kamalaharris.com/a-new-way-forward/#:~:text=Vice%20President%20Harris%20and%20Governor%20Walz%20will%20work%20to%20reduce,and%20speed%20implementation%20of%20multi%20state%20or%20universal%20licensing%20recognition.">doing away</a> with barriers to licensing and making it easier to recognize credentials across states."Many startups may be able to deduct the cost of those startup expenses more quickly and more fully, which could encourage, at least on that margin, a little bit more startup activity," Watson said.Meanwhile, Tedeschi said Trump's tariffs could weigh on small businesses. Importers might have to choose between raising prices or absorbing the cost through lower margins.But Tedeschi said both candidates' proposals to eliminate taxes on tips could ultimately be a boon for small businesses."The employer's going to be able to pay a little bit less for those jobs, given the demand for them," he said. "The tipped workers are probably going to end up fine because again, their tips are tax-free."Trump's proposal to <a target="_blank" href="https://www.businessinsider.com/tax-tips-overtime-trump-proposals-income-money-election-2024-10">eliminate taxes on overtime pay</a> could also benefit small businesses by allowing them to reconfigure how they schedule and pay workers.One question mark for both campaigns is a TCJA provision that allows some business owners to deduct their business income from their taxable income. Democrats in Congress are hoping to preserve the deduction for business owners making under $400,000 but change it for those above that threshold, a Senate Finance Committee aide told BI.

What a Trump or Harris presidency would mean for your tax bill

The deadline to file your <keyword id="19948101" type="General" weightage="20" keywordseo="income-tax-returns" source="keywords">income tax returns</keyword> is approaching fast, and Sana is perplexed. All of 23, she's just started earning and working at an MNC, earning Rs 7,00,000 per annum, and can't figure out which <keyword id="20301439" type="General" weightage="20" keywordseo="tax-regime" source="keywords">tax regime</keyword> would work best for her. If you're having the same concerns and can't seem to wrap your head around the <keyword id="19935168" type="General" weightage="20" keywordseo="new-tax-regime" source="keywords">new tax regime</keyword>, here's a ready reckoner for you: When should I choose new tax regime? Think of choosing a tax regime as having to choose a friend in office. The <keyword id="8706677" type="General" weightage="20" keywordseo="old-tax-regime" source="Orion">old tax regime</keyword> is that aged, wise senior who has answers and hacks for everything. Want to get over with a boring project quickly? They will certainly have a trick up their sleeve! On the other hand, the new regime is far more chilled out, lax and is a no-nonsense person who wants nothing to do with long documents and longer meetings. The new regime was introduced in budget 2020 to simplify taxation, and offer lower rate of taxes as compared to the old regime. However, there's a catch. You cannot claim the 70+ exemptions and deductions that help bring down your taxable income and hence, reduce your tax liability. This option is exclusively available under the old tax regime. The main USP of this tax regime? Lower tax rates, and fuss of deductions! Consider this. If your income is within the range of Rs 5,00,000-Rs 12,00,000, and you have no investments, <keyword id="99916" type="General" weightage="20" keywordseo="house-rent-allowance" source="Orion">house rent allowance</keyword> (<keyword id="19944588" type="General" weightage="20" keywordseo="hra" source="keywords">HRA</keyword>), health/life insurance premiums or other such deductions to claim, the new tax regime would obviously make more sense to you, given the significant difference in tax liabilities (just 5% under new regime, and a whopping 20% in old regime for those in the Rs 5-6 lakh bracket!) <div type="image" title="Tax rates under old and new regime" msid="111685908" hostid="261"></div> So, if you're someone who hates complex tax calculations, wants minimal tax deductions, the new regime might just be for you! But remember, there are two conditions under which this new regime will be automatically chosen for calculating your taxes: <ul><li>If you keep procrastinating and don't file your <keyword id="6374875" type="General" weightage="20" keywordseo="ITR" source="Orion">ITR</keyword> till July 31, 2024</li><li>If you do not specifically opt for the old tax regime on your employer's HR portal</li></ul>Also, if you earn less than Rs 3,00,000 per annum, you are completely exempted from paying any tax at all. In the old regime, this basic limit is slightly lower at Rs 2,50,000. Also read: <a href="https://www.businessinsider.in/personal-finance/income-tax/all-you-need-to-know-about-the-new-tax-regime/articleshow/111578840.cms" data-type="tilCustomLink">All you need to know about the new tax regime</a> So, what do I get under this regime? Thanks to a rebate under Section 87A, if you earn up to Rs 7 lakh per annum, your tax liability (and Sana's as well) will effectively be zero. This is limited to Rs 5 lakh under the old regime. While a <keyword id="20429578" type="General" weightage="20" keywordseo="standard-deduction" source="keywords">standard deduction</keyword> of Rs 50,000 is available under both of them (so you can directly deduct Rs 50,000 from your total income before even beginning to calculate your tax liability), there are a lot more deductions and exemptions that this regime DOES NOT allow you to avail: <ul><li>Leave Travel Allowance (LTA)</li><li>House Rent Allowance (HRA) (Comes in handy if you're paying hefty rents in metros)</li><li>Interest on housing loan (on self-occupied property or vacant property)</li><li>Own contribution to NPS (If there's any)</li><li>Interest earned on savings bank A/Cs </li><li>Investments made in ELSS, PPF</li><li>Premiums paid towards life, health insurance policies</li></ul>As for the deductions that are allowed, that makes for a pretty small list: <ul><li>Transport allowances (only if you are specially abled)</li><li>Gifts of up to Rs 50,000</li><li>Employer’s contribution to your NPS account</li><li>Interest paid on home loan only on let-out property</li></ul>But that's the trade-off. You get to pay taxes at low rates, yes, but you also don't get to claim a whole lot other deductions. Notes CA Nitesh Buddhadev, "Which regime is beneficial for you depends upon the allowances and deduction available to you during a relevant financial year. So, if your total income from salary is Rs 10.5 lakh and if the aggregate of any of the deductions / allowances you can claim is less than Rs. 3.15 lakh, you should opt for the new tax regime. If you have not invested in multiple tax-savings scheme, the new regime will work better. So, don't make this decision in any haste. You can choose your tax regime only once in a financial year. And if your income from business or other professions, be even more careful, because this will then become a once in a lifetime choice for you (quite literally!). So, take a good hard look at your finances, and then decide what works best for you!

Confused about the new tax regime? Here's when you should opt for it

July's here, and as we inch closer to the budget, which is set to be presented around the latter half of July, there is much talk about how it will affect our pockets. Reports suggest the government is considering raising the <keyword id="20429578" type="General" weightage="20" keywordseo="standard-deduction" source="keywords">standard deduction</keyword> threshold from existing Rs 50,000 to Rs 1,00,000, amidst other things. The most common wish for a salaried employee is to reduce the income tax rates across all slabs, but at the moment, this seems unlikely. That aside, we decode the common man's wish list and what they look forward to in terms of <keyword id="22225988" type="General" weightage="20" keywordseo="income-taxes" source="keywords">income taxes</keyword> as the Finance Minister <keyword id="19916618" type="General" weightage="20" keywordseo="nirmala-sitharaman" source="keywords">Nirmala Sitharaman</keyword> drafts the budget. <h2>Wish 1: Raise the standard deduction to Rs 1 lakh</h2>A standard deduction is a fixed amount that you can deduct from your taxable income right away, to reduce your overall tax liability. You do not need to furnish any proofs for this amount. Currently, this stands at Rs 50,000, under both old and new tax regimes. Raising this threshold to Rs 1,00,000 will mean more disposable income in your hands. And as per the policy experts, this is the most likely change that we can expect under the new budget. <h2>Wish 2: Increase the <keyword id="20228341" type="General" weightage="20" keywordseo="basic-exemption-limit" source="keywords">basic exemption limit</keyword> in new tax regime</h2>As per EY's pre-budget expectation report, an increase in the basic exemption limit from the present Rs 3,00,000 to Rs 5,00,000 would immensely benefit the common man. Earlier, this limit was set at Rs 2,50,000. Note that unless you specifically opt for the old regime, the new tax regime is considered as your default choice starting 2023. If your annual income is equal to, or falls below this basic exemption limit, you do not have to pay any income tax. <h2>Wish 3: Increase tax-free limit of LTCG gains </h2>At present, if you sell any equity mutual fund unit or share after more than 12 months of holding it, you'll have to pay a 10% long-term capital gains (LTCG) tax. However, within one financial year, long-term capital gains below Rs 1,00,000 are tax-exempt. As EY's report notes, raising this extant tax-free limit to Rs 2 lakh would be beneficial, especially in boosting long-term investing sentiment in the country. But will this come true? Only Nirmala Sitharaman knows! <h2>Wish 4: Consider some tier-2 cities as metros for HRA exemption </h2>Residents of Gurugram, Noida, Bengaluru, listen up! HRA, or House rent allowance is a crucial component of our salary, and hence, our tax planning as well. You can get HRA exemption on the lowest amount amidst these 3: 1. Actual HRA received 2. 50% of salary for metro cities (Delhi, Mumbai, Kolkata, Chennai) 3. 40% of salary for non-metro cities 4. Rent paid- 10% of salary But its no secret that residents of nearby cities like Noida, Gurugram, Faridabad, or rapidly developing urban hubs like Pune, Ahmedabad, Ghaziabad, Hyderabad, Bengaluru, Thane bear the brunt of sky-high residential rents that takes a huge toll on their monthly income. Yet, they cannot claim 50% of their salary for HRA exemption. Since these cities has been classified as a non-metro, residents can claim a maximum of 40% of their salary as exemption. In case rent exceeds Rs 1,00,000 annually, you are also required to furnish the PAN details of landlord, along with a formal rental agreement. Consider this. You live in Delhi, and have an annual income of Rs 10,00,000. For HRA purposes, you can claim exemption of up to Rs 5,00,000, since Delhi is considered a metro. But, if you live in Ghaziabad, or Noida, the limit available to you sharply falls down to Rs 4,00,000. This budget, as reports note, considering these cities as metros for tax purposes would provide some relief to the common man's pocket. Per a recent report by ANAROCK research, the top 7 cities in the country (Mumbai metropolitan region, Hyderabad, Bengaluru, Pune, Delhi NCR, Chennai and Kolkata) saw an average price rise between 13-39% on a yearly basis. In fact, it was Hyderabad recorded the highest yearly price rise in residential property last quarter, jumping by as much as 39%. <h2>Wish 5 : Enhance exemption limits under the old regime</h2>The list is endless, but so are our wishes! Experts are also suggesting an enhancement in the existing limit for deduction towards interest on housing loan for self-occupied house. From its present limit of Rs 2 lakh, it should be taken to Rs 3 lakh. Also, the Rs 2-lakh cap on set off of house property loss against other heads in the same year should be done away with. For senior citizens, there should also be greater clarity on how funds received from <keyword id="19919089" type="General" weightage="20" keywordseo="nps" source="keywords">NPS</keyword> (National Pension System) via the systematic lumpsum withdrawal plan should be taxed. Well, we can only hope some, if not all of these wishes come true when finance minister presents the union budget in the parliament this month.

Budget 2024: Increase standard deduction, exemptions and more, an aam aadmi's wishlist

<div type="image" title="For the unversed, trading in futures and options can be akin to setting their hard-earned money on fire" height="900" width="1200" msid="114064202" hostid="261" caption="&amp;lt;p&amp;gt;For the unversed, trading in futures and options can be akin to setting their hard-earned money on fire&amp;lt;/p&amp;gt;"></div> Once upon a time, there thrived a wild, wild land. Here, it was all about super high monetary stakes, lightning-fast trade deals, and bucketloads of money shifting hands every single second. This wilderness lured millions of individuals with the promise of super duper high returns. But, at what cost? Welcome to the unforgiving, ultra-risky wild west of <keyword id="19991165" type="General" weightage="20" keywordseo="Indian-equity-markets" source="keywords">Indian equity markets</keyword> called the <keyword id="145718" type="General" weightage="100" keywordseo="Futures-and-Options" source="Orion">futures and options</keyword>. Here, everyone seems to just fly right through the bright red-flagged warnings of financial risks to earn even a fraction of these promised returns. Most burn themselves in the process, but carry on nevertheless, as if nothing ever happened. <h2>Chasing the cloudy profits</h2>The data conclusively proves that every 9 out of 10 individuals only lost their hard-earned money in this land. But hey, what do the numbers know? Some hide their losses out of shame, some out of fear. The proponents, meanwhile, proudly boast unusually high returns on their investments, some open social media channels while others encourage their friends and family to take the plunge. Naturally, news of this unstoppable and humongous en-masse migration to the F&amp;O (futures and options) town has reached sheriff <keyword id="19901201" type="General" weightage="20" keywordseo="SEBI" source="keywords" meta.keywordsubtype="org" meta.entityname="SEBI" meta.hostid="261" meta.entityid="SEBI">SEBI</keyword>, galvanising them into action. After all, it was time to put a leash on this madness and save the common man. The inhabitants of this town doubled in the last 2 years, from 51 lakh in FY22 to 96 lakh in FY24—99.8% of whom were small and mid-income traders. But profits? Well, that's a different, rather completely absent story. <h2>Que Sera Sera, much?</h2>A recent report by SEBI (Securities and Exchange Board of India) that studied profits and losses made by traders in the equity derivatives segment between FY22-24 exposed the mad mania of futures and options trading in India, especially since the pandemic. Per the report, 91.1% of individual traders, or about 73 lakh traders had only lost money trading in futures and options in FY24. Between FY 22-24, over 1 crore traders, or about 92.8% of individual traders, had lost Rs 2 lakh each. But once bitten, twice shy? Well, not in this case. More than 75% of individuals, who had only made losses trading in F&amp;O in FY22 and FY23, continued to trade vigorously in FY24 as well, without any changes in the bottom line, which remained deep in red and negative. So, then all these traders must be uber-rich, with tons of cash and not much care to spare? Nope. 76% of traders in the F&amp;O space in FY24 had an annual income of less than Rs 5 lakh. 2 years ago, their share stood at 71%. And their choice of poison? Options! In FY24, 60% of traders made losses trading in futures, but a whopping 91.5% burnt their funds trading in options. Mind you, futures are riskier than options. With futures, which require significant capital investment, the buyer and seller both are contractually bound to adhere to the pre-determined strike price of the futures or options contract, irrespective of whether the prevailing prices are higher or lower (and thus, resulting in losses for either the buyer or seller). With options, since this adherence ain't necessary, individuals end up taking debt to take highly leveraged positions while trading here. <h2>Scale of the explosion</h2>Anyone who trades even infrequently will tell you that a demat account is the mitochondria or powerhouse of the trading cell. As of August 2024, India had over 17.1 crore <keyword id="20957284" type="General" weightage="20" keywordseo="demat-accounts" source="keywords">demat accounts</keyword>, which are a prerequisite for trading in the markets. India is the 9th biggest country in the world, in terms of total demat accounts. Did you know that our demat accounts are at par with the entire population of Bangladesh? Talk about scale! Just 4 years ago, in March 2020, this number was a mere 4 crore. Naturally, the total F&amp;O turnover on both <keyword id="20004725" type="General" weightage="20" keywordseo="NSE" source="keywords" meta.keywordsubtype="org" meta.entityname="NSE" meta.hostid="261" meta.entityid="NSE">NSE</keyword> and BSE has hit the roof, and also broken it. As of October 4, 2024, the total futures and options turnover on NSE stood at a massive Rs 4,78,27,27,750.30 crore. Good luck counting the thousands! <table style="border-width: initial; border-style: none;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Year </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Total Turnover (Both Futures and Options) (In Rs Crore) </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2020-21 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">64,36,03,951.51 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2021-22 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1,69,52,33,134.47 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2022-23 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">3,82,23,26,468.06 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">2023-24 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">7,99,27,67,152.43 </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table>Source : NSE Another metric that underlines the meteoric growth of trading in India is the collection of STT or <keyword id="20930760" type="General" weightage="20" keywordseo="Securities-Transaction-Tax" source="keywords">Securities Transaction Tax</keyword>. As of September 2024, India's STT mop-up had gone past Rs 26,000 crore. Traders have to pay STT whenever they buy or sell any security in the market. So, more trading brings in more STT, and hence, more revenue for the government, so they're not really complaining. After all, this is certainly what they'd call enviable growth. As of August 2023, our STT collection stood at about Rs 21,599 crores. And in FY20-21, India's STT collection had been Rs 16,000 crore. If only our salaries also managed to grow at this rate! <h2>So, what's happening?</h2>Two things. One, it's the big bulls who are raking in all the moolah. And it's the younger lot (those aged under 30) who are propping them up for this. In FY24, 43% of individual traders in the market were less than 30 years of age. In just one year, this number has swelled by 12 percentage points from just 31% of individual traders. But who says ageing is bad? Wrinkles and silver hair seemingly have a propensity of incurring lesser losses in the market. In FY24, only 79% of traders aged above 60 years made losses, as compared to 93% of those aged below 30. Small and mid-income traders, which make up 98% of the total trader base, witnessed average losses per person of Rs 65,000 and Rs 1.5 lakh in FY24 in futures and options, respectively. The winner here? Clearly, the big bulls, who declared an annual income of over Rs 1 crore, ended up with average profits of Rs 96,000 per person this year. <h2>What’s the sheriff up to?</h2>The government has finally swung into action, hiking the STT rate for F&amp;O during this year’s budget. Effective October 1, 2024, the STT on futures stands at 0.02%, up from 0.0125%. For options, it was upped to 0.1% versus 0.0625% previously. Small margins, but huge impact oncoming. Says Puneet Sharma- CEO and Fund Manager at Whitespace Alpha, “SEBI aims to enhance market stability while safeguarding investor interests, reflecting the regulator's intent to balance risk management with market participation”. But this might come with its own share of challenges, too. “Stricter norms around leverage, transparency, and capital adequacy could limit the ability of investors to determine their own risk appetite, thereby stifling innovation in trading strategies. Over-regulation in an environment that thrives on strategic flexibility and creativity could dampen the market’s dynamism, affecting India's competitiveness in the global derivatives landscape”, he observes. SEBI recently came out with a set of guidelines that aim to thwart <keyword id="19972907" type="General" weightage="20" keywordseo="retail-investors" source="keywords">retail investors</keyword>' participation in futures and options and hinder them from taking undue risks. Here's a quick recap of what's to come for the residents of the F&amp;O town Margin Requirements: To battle the high volatility and chaos which is generally seen on expiry days(i.e the last mandated date, post which an option becomes invalid), SEBI will put in place an extreme loss margin (ELM) of 2% for all open short options on the day of expiry. Translation? Traders will need to pony up more cash upfront, leaving them with fewer funds to take on risky bets. It ain't a choice: No more of one expiry every single day! Going ahead, an exchange like BSE or NSE will just be able to offer weekly expiries, that too, only on one benchmark index, as opposed to an entire buffet it currently offers. At present, NSE offers weekly options contracts for its financial index, bank and midcap indices. But say goodbye to this, and hello to derivatives on only 1 index per exchange. Raising the bar: Effective November 30, 2024, the minimum contract value for index derivatives will be upped to Rs 15 lakh, from the present Rs 5-10 lakh. The hope is that by making it ultra-expensive to enter these trades, investors will be dissuaded from taking on risky trades. Pay upfront: Starting February 2025, those trading in options will have to pay the entire options premium upfront, even before their trades are executed. This is because options generally carry very high leverage, and paying a significant sum upfront can force traders to think twice. Invigilation Pro Max: Starting April 1 2025, to make sure that the number of positions for equity index derivatives does not slyly slip over the mandated limit, especially on expiry days when trade volumes are huge, the exchanges will have to take a minimum of 4 position snapshots randomly. The question is, will these injections of sobriety be enough to calm down the steroid-fed bull of the futures and options market in India? Well, only time and market turnover will tell! For more insights into the financial markets and business news, stay tuned to our site and social media handles. And don’t forget to subscribe to Business Insider India’s newsletters for your weekly dose of Simply Put! Disclaimer: The content on this website is for informational purposes only and should not be construed as investment advice. We recommend readers consult certified, qualified and registered advisors for professional and personalised financial advice.

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