15 income tax rule changes in 2024 that will impact your ITR filing in 2025 ET Wealth Online has listed 15 income tax changes in 2024 and how they will affect you when you file your income tax return next year
The year 2024 saw income tax changes in the middle of the year. This happened because the government presented the Union Budget 2024 in July due to General elections held between April and June, 2024. As the budget was presented in the middle of the year, many taxpayers may have forgotten the income tax law changes that were announced in July 2024. Most of the income tax changes announced in July 2024 are effective from the current financial year 2024-25. These changes will also impact the tax deductions and exemptions that can be claimed while filing an income tax return (ITR) in July 2025.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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ET Wealth online list outs 15 income tax changes that happened in 2024 and their impact on tax calculations for financial year 2024-25 and ITR filing in 2025.
1. New income tax slabs changed under new tax regime
The government has changed the income tax slabs under the new tax regime. The changes in the income tax slabs under the new tax regime will help individuals and other taxpayers to save more income tax for FY 2024-25.Impact: The changes made in the income tax slabs under the new tax regime will allow taxpayers to save income tax up to Rs 17,500 in a financial year.
New income tax slabs under the new tax regime for FY 2024-25 are:
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Income tax slabs (Rs)
Income tax rate (%)
0-3,00,000
0
3,00,001-7,00,000
5
7,00,001-10,00,00
10
10,00,001-12,00,000
15
12,00,001-15,00,000
20
15,00,001 and above
30
2. Standard deduction limit hiked
Along with changes in the income tax slabs the government hiked the standard deduction limit under the new tax regime. If an individual opts for the new tax regime for FY 2024-25, he/she can claim a standard deduction of Rs 75,000 instead of Rs 50,000 earlier.The standard deduction limit has been hiked to Rs 25,000 from Rs 15,000 for family pensioners as well under the new tax regime.
There is no change in the standard deduction limit if an individual opts for the old tax regime for FY 2024-25 (AY 2025-26). Under the old tax regime, an individual can claim a standard deduction of Rs 50,000 (as a salaried and pensioner) and Rs 15,000 (as a family pensioner).
Impact: The hike in standard deduction limit under the new tax regime will help salaried people and pensioners claim a higher standard deduction and thereby lower their tax outgo if they are opting for the new regime. A standard deduction from gross salary income can be claimed (before calculating tax levy) if an individual is receiving either salary, pension, or family pension.
Standard deduction cannot be claimed for pension received from insurance companies.
3. Higher deduction on employer's contribution to NPS
If an individual opts for the new tax regime in FY 2024-25, he/she can claim a higher deduction for the employer's contribution to the National Pension System (NPS). The new tax regime allows individuals to claim a deduction of up to 14% of their basic salary for the employer's contribution to the NPS. Earlier, an employee can claim a deduction of up to 10% of their basic salary.This deduction is claimed from gross income under Section 80CCD (2) of the Income Tax Act, 1961, to arrive at taxable income. Apart from the standard deduction, this is the only deduction that can be claimed under the new tax regime.
Under the old tax regime, Section 80CCD (2) deduction can be claimed over and above Section 80C deduction of Rs 1.5 lakh and Section 80CCD (1b) of Rs 50,000 NPS investment. There is no change in the deduction limit (for tax-saving purposes) on an employer's contribution to NPS under the old tax regime.
Impact: A higher deduction under the new tax regime will help individuals choosing this regime to save more tax as compared to the same regime earlier. However, remember if the employer's total contribution to the Employees Provident Fund (EPF), NPS, and Superannuation fund exceeds Rs 7.5 lakh in a financial year, then the employer's contribution will be taxable in your hands. Further, interest and return earned from the excess contribution will be taxed as well.
4. New tax rates for LTCG and STCG
The government has revised the capital gains taxation rules from FY 2024-25. The changes have been made to simplify the capital gains taxation regime. The new capital gains taxation regime is as follows:i) Short-term capital gains on equity and equity-oriented mutual funds will be taxed at 20%. This has been hiked by 5% from 15% earlier.
ii) Short-term capital gains from other assets (financial and non-financial), such as house, gold, etc., will be taxed at income tax slabs applicable to the income.
iii) Long-term capital gains from any asset (financial or non-financial) will be taxed at 12.5%. The LTCG tax rates will not be different for different assets as was the case earlier.
iv) LTCG from equity and equity-oriented mutual funds will be exempt from tax up to Rs 1.25 lakh per financial year instead of Rs 1 lakh earlier.
v) The indexation benefit available on LTCG from the sale of house property has been partially withdrawn. As per the amended laws, an individual can choose between two methods to pay tax on LTCG from sale of house property provided the house has been bought on or before July 22, 2024. These methods are: (a) Tax calculated on LTCG with indexation at a tax rate of 20% and (b) Tax calculated on LTCG with no indexation at a tax rate of 12.5%. For houses bought on or after July 23, 2024, the LTCG from the sale of the house property will be taxed at 12.5% without indexation benefit.
Further, the choice of taxation method for LTCG in case of houses bought before July 23, 2024, is allowed only for resident individuals and Hindu Undivided Families (HUFs). Non-resident taxpayers and other categories of taxpayers will not be eligible to choose and will have to pay 12.5% without indexation.
Also read | New capital gains tax after Budget 2024: STCG, LTCG rates on equity, debt MFs, ETFs, gold funds; latest mutual fund tax rules
Impact: The amended capital gains tax regime will make it easier for individuals to calculate their income tax liability on capital gains. Earlier, there were different rules to calculate tax on capital gains for different capital assets.
Taxpayers should remember that the new capital gains regime is effective from July 23, 2024. If the assets are sold on or before July 22, 2024, then old capital gains tax rules will apply.
5. Changes in holding period for capital gains taxation
The government has also amended the time period for capital assets to categorise the capital gains as long term or short term capital gains. According to new rules, there will be only two holding periods for capital assets to determine whether the capital gains will be short term or long term. For all listed securities, the gains will be termed as long term capital gains if the holding period will be 12 months. On the other hand, for all the non-listed securities the holding period will be 24 months for capital gains on these securities to be classified as long term.Impact: The changes in the holding period will make it easier for taxpayers to remember how long they should hold different assets before selling so that capital gains on the assets qualify as long-term capital gains.
6. Rationalisation of TDS rates
The government has rationalised the multiplicity of TDS rates on different incomes. However, this rationalisation of TDS rates has been done for some incomes only. TDS rates have not been changed for TDS on salary, virtual digital assets, winnings from lottery etc./ racehorses, payment on transfer of immovable property, payments to non-residents, contracts etc.The government has rationalised the following TDS rates:
Section
New TDS rates
Effective date
Section 194D – Payment of insurance commission (in case of person other than company)
2%
April 1, 2025
Section 194DA- Payment in respect of insurance policy
2%
October 1, 2024
Section 194G – Commission etc on sale of lottery tickets
2%
October 1, 2024
194H – Payment of commission or brokerage
2%
October 1, 2024
Section 194-IB – Payment of rent by certain individuals and HUFs
2%
October 1, 2024
Section 194M – Payment of certain sums by individuals or Hindu Undivided Family
2%
October 1, 2024
Section 194-O – Payment of certain sums by e-commerce operator to e-commerce participants
0.1%
October 1, 2024
Section 194F relating to payments on account of repurchase of units by Mutual funds or Unit Trust of India
Proposed to be omitted
October 1, 2024
Impact: The rationalisation of the TDS rate will help taxpayers affected by these changes receive more money in their hands as less is deducted from the payment made to them.
Also read | Revised TDS rates from October 1: Here are the new tax deducted at source rates on various transactions
7. Claiming TDS/TCS tax credit to lower TDS on salary
Salaried employees have been allowed to claim credit of tax deducted on other incomes (other than salary) and tax collected at source from other expenses against tax deductible at source (TDS) from salary income.Impact: Claiming TDS and TCS tax credits from other incomes and expenses will allow salaried individuals to reduce the tax amount being deducted from their salaries. This will help individuals avoid cash flow issues and have more money in their bank accounts.
Also Read | New form to reduce TDS from salary: CBDT issues Form 12BAA to tell employer about other taxes paid by you
8. Allowing TCS credit to other person
To ease the cash crunch of the middle class, the government has allowed persons other than the collectee (from whom tax is collected (TCS)) to claim credit of the TCS in place of the collectee.Impact: The government has already notified the mechanism by which the TCS tax credit can be claimed by a person other than the collectee. The new provision will help parents who pay money for children's tuition fees in foreign universities but are unable to claim TCS credit on their behalf. However, note that the new rule will come into effect from January 1, 2025.
https://economictimes.indiatimes.com/wealth/tax/new-relief-for-income-taxpayers-cbdt-allows-other-person-to-claim-tcs-credit-for-tax-paid-on-expenses-like-foreign-travel-study-abroad/articleshow/114313526.cms
9. Tax on buyback of shares
The government has amended the income tax laws on taxing sale proceeds of shares bought back (via buyback) by the companies. As per the amended laws, the sale consideration received by owner of shares on buyback of the shares will be taxed in the hands of the individual owner. This will be similar to the way dividends are taxed in the hands of individual recipients at the income tax slab rates applicable to them. Impact: The new law has come into effect from October 1, 2024. The amended law is likely to increase the income tax liability of individuals whose income is taxed at a 30% tax slab rate. However, those individuals whose income is taxed at less than 20%, are likely to benefit. They will have to pay a lower tax on the sale proceeds of buyback of shares. Till September 30, 2024, the company (which bought back shares) paid DDT (Dividend distribution Tax) on the buyback of shares at 20% plus a surcharge at 12% and cess at 4%.
Also read | New relief for income taxpayers: CBDT allows other person to claim TCS credit for tax paid on expenses like foreign travel, study abroad
10. TCS on buying notified luxury goods
An individual buying notified luxury goods will have to pay more as he/she will be liable to pay TCS (Tax collected at source) as well. The TCS will be levied on the value of goods exceeding Rs 10 lakh. Impact: The new law will come into effect from January 1, 2025. However, the government has yet to notify the list of luxury goods and how the TCS will be implemented.
11. Amendment in TDS on sale of house property
The law on TDS on sale of property has been amended to ensure that tax is deducted by the buyer before payment is made to the seller. As per the amendment, TDS on the sale of property must be deducted from the total payment made to the seller if the total payment exceeds Rs 50 lakh, irrespective of the share of each seller is less than Rs 50 lakh. The tax is deducted on the total amount of payment.Impact: The new amendment has come into effect from October 1, 2024. The amendment has been made as a clarification to prevent TDS avoidance on the sale of property by misinterpreting the income tax law.
12. TDS on RBI floating rate bonds
The government has included the RBI floating rate bonds in the list of financial instruments returns from which are subject to TDS. The TDS will be deducted if the interest received on the RBI floating rate bonds exceeds Rs 10,000 per month.Impact: The new law has come into effect from October 1, 2024. The new TDS law will reduce the amount received by investors as tax will be deducted before making the final payment to the investor.
13. Introduction of Vivad se Vishwas Scheme 2.0
The government has introduced a Direct Tax Vivad Se Vishwas Scheme again to resolve litigation between taxpayers and the income tax department. Impact: The scheme has been notified by the income tax department and has come into effect from October 1, 2024. Taxpayers with litigation pending with the income tax department can make use of the scheme to resolve the issue. The government is yet to notify the closing date.
Also read | New relief for income taxpayers: CBDT allows other person to claim TCS credit for tax paid on expenses like foreign travel, study abroad
14. Aadhaar enrolment number cannot be quoted in ITR and PAN application forms
Budget 2024 also disallowed individuals from quoting his/her Aadhaar enrolment number in income tax returns and PAN application forms. The income tax laws, since 2017, allowed an individual to quote his/her Aadhaar enrolment number in income tax return forms and PAN application forms if the individual did not have an Aadhaar number. However, effective October 1, 2024, an individual will not be able to quote the enrolment number in the ITR and PAN application form.
Impact: Now having an Aadhaar number is mandatory to file an income tax return or to apply for a PAN. If an individual does not have an Aadhaar number, then they cannot file an ITR or apply for a PAN even if they have the Aadhaar enrolment number.
15. Time limit to open old ITRs has been revised
The government has, in specific cases, reduced the time limit within which old ITRs can be opened. As per the new amendment, if the income escaping assessment exceeds Rs 50 lakh, then the income tax department has time till 5 years from the end of the assessment year to open the old ITRs. Till August 31, 2024, the income tax department had time till 10 years from the end of the assessment year.Impact: The new amendment aims to reduce litigation and tax uncertainty.
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This story originally appeared on: India Times - Author:Faqs of Insurances
