Significant Changes in Income Tax Rules for FY 2024-25

The Income Tax regime for FY 2024-25 has undergone several noteworthy updates, affecting both individuals and businesses. These changes are aimed at promoting transparency, streamlining compliance, and offering tax relief where applicable. Here is a detailed overview of the key reforms and their effective dates.

1. TDS on Bonds

• Change: A 10% TDS will now apply to income from central, state government bonds, and floating rate savings bonds.
• Exemption: No TDS if the annual income from such bonds is less than ₹10,000.
• Effective Date: October 1, 2024

2. Vivad Se Vishwas Scheme 2024

• Update: This revised scheme allows for the settlement of tax disputes, including tax, interest, penalties, and fees, pending in appellate bodies, high courts, or the Supreme Court.
• Effective Date: October 1, 2024

3. Aadhaar Card Rules

• Change: Aadhaar Enrolment ID will no longer be accepted for PAN applications or ITR filing. The Aadhaar number is now mandatory.
• Effective Date: October 1, 2024

4. Reduction in TDS Rates

• Details:
  • Payments under Sections 19DA, 194H, 194-IB, and 194M will now attract 2% TDS.
  • E-commerce TDS reduced from 1% to 0.1%.
• Effective Date: October 1, 2024

5. Taxes on Share Buybacks

• New Rule: Shareholders will now bear taxes on share buyback proceeds, similar to dividend taxation.
• Effective Date: October 1, 2024

6. Securities Transaction Tax (STT) Update

• Revision:
  • STT on futures has increased to 0.02%, while options now carry an STT of 0.1%.
  • Tax on the sale of options is raised from 0.0625% to 0.1%.
• Effective Date: October 1, 2024

Income Tax Changes Applicable from April 1, 2024

7. New Income Tax Slabs under the New Regime

• Slabs:
  • 0% for income up to ₹3 lakh
  • 5% for ₹3-6 lakh
  • 10% for ₹6-9 lakh
  • 15% for ₹9-12 lakh
  • 20% for ₹12-15 lakh
  • 30% for income above ₹15 lakh

8. Surcharge Rate Reduction

• Update: Surcharge reduced from 37% to 25% for individuals earning more than ₹5 crore.

9. Increased Tax Rebate (Sec 87A)

• New Limit: Tax rebate increased from ₹12,500 to ₹25,000 for income up to ₹7 lakh.

10. Standard Deduction for Salaried Individuals

• Benefit: A standard deduction of ₹50,000 will now be available under both the old and new tax regimes.

11. Life Insurance Policy Taxation

• Change: Income from policies with premiums exceeding ₹5 lakh per year will now be taxable (excluding ULIPs).

12. Presumptive Tax Scheme Enhancements

• New Limits:
  • Small businesses (Sec 44AD) with turnover up to ₹3 crore.
  • Professionals (Sec 44ADA) with turnover up to ₹75 lakh.
  • Condition: At least 95% of transactions must be digital.

13. Tax Exemption on Leave Encashment

• Update: For non-government employees, the exemption limit for leave encashment is increased from ₹3 lakh to ₹25 lakh.

Conclusion

These changes reflect the government’s focus on easing tax compliance, offering relief to individuals and businesses, and promoting digital transactions. Taxpayers should review these changes closely and plan their finances accordingly to maximize benefits and ensure compliance.