Income tax rule: As 2024 ends, it’s clear that India’s financial sector has experienced significant income tax reforms. The Union Budget 2024-25 introduced impactful changes to personal income tax, further refined by announcements in July 2024. Effective for the current financial year (2024-25), these revisions will influence the deductions and exemptions taxpayers can claim when filing their income tax returns(ITR) in July 2025.
1). New regime income tax slabs changed under the new tax regime
The new tax regime’s revised slabs offer taxpayers potential annual savings of ₹17,500.
New regime income tax slab rates
Up to ₹3 lakh – Nil
₹3-7 lakh – 5%
₹7-10 lakh – 10%
₹10-12 lakh – 15%
12-15 lakh – 20%
Above ₹15 lakh – 30%
2). Standard deduction hiked
Under the new tax regime, the government increased the standard deduction ceiling from ₹50,000 to ₹75,000 and the standard deduction limit for family pensioners from ₹15,000 to ₹25,000.
3). Old regime income tax regime
The budget announcements on July 22 did not change the old tax regime. However, the standard deduction limit does not change if an individual opts for the old tax regime.
Old regime income tax slab rates
Upto ₹2.5 lakh- Nil
₹2.5- ₹5 lakh- 5%.
₹5 lakh to ₹10 lakh- 20%.
Income above ₹10 lakh- 30%.
4). Capital gains taxation
Short-term capital gains tax has increased from 15% to 20%, and long-term capital gains tax has risen from 10% to 12.50% on listed shares and equity mutual funds. The tax-exempt threshold for long-term capital gains has also been raised from ₹1 lakh to ₹1,25,000.
5). Increase in rates of Securities Transactions Tax
Traders in equity derivatives (F&O) will face higher Securities Transaction Tax (STT) rates. The STT on options will increase from 0.0625% to 0.1% of the premium (the same rate as delivery transactions), while the STT on futures will rise from 0.0125% to 0.02% of the traded price.
6). Changes in taxation of buyback of shares
From October 1, 2024, the tax treatment of share buybacks has changed significantly. Previously, shareholders were exempt from tax on buyback proceeds (under Section 10(34A)), while the company paid a 20% tax (plus surcharge and cess) on the net buyback amount. Amended income tax laws will tax buyback proceeds as income for individual shareholders, similar to taxing dividends at their applicable income tax slab rates.
7). Indexation benefit
The indexation has been removed for all long-term capital gains. However, a resident Indian or a HUF has been given an option of 12.5% without indexation and 20% with indexation benefits on land and property sales. This change is a major concern for many real estate investors, particularly those who have held properties for extended periods, as it’s expected to increase their tax burden.
8). TDS
Several key changes to Tax Deducted at Source (TDS) were proposed in Budget 2024. The 5% TDS rate on various payments will be merged into the 2% rate, and the 20% TDS on mutual fund/UTI unit repurchases will be withdrawn. The TDS rate for e-commerce operators is set to decrease significantly from 1% to 0.1%. Additionally, Tax Collected at Source (TCS) will be creditable against TDS deducted from salaries. Finally, delays in TDS payments will be decriminalized, provided the payment is made by the TDS statement filing deadline.
9). Reopening Assessments: ₹50 Lakh Threshold
Assessments can now be reopened up to five years after the end of the relevant assessment year, but only if the escaped income exceeds ₹50 lakh.
10). Vivad se Vishwas scheme
For dispute resolution and dispose-off backlogs, the Union Finance Minister proposed the Vivad se Vishwas Scheme, 2024, to resolve certain income tax disputes pending appeal.
This scheme was announced in Budget 2024 and allows taxpayers to pay a lower tax amount. “Under this scheme, you must pay the disputed tax amount and a specified percentage of this amount along with Form 1 to the Income Tax Department. Once this amount is deposited, the Income Tax Department will close the dispute and waive all the additional penalties and interest applicable,”said Abhishek Soni, CEO of Tax2win.
