The Union Budget 2024–25 has been announced, and it is shaking the grounds concerning income tax provisions. Having your head in your hands while trying to make sense of all these new changes to cost you your wallet? Chill! 

Here's the lowdown on all those adjustments to the Income-tax Act, 1961, because of the Finance (No. 2) Bill, 2024. Grab that coffee, and let's dive into the nitty-gritty!

 

Some significant points of the Union Budget, 2024-25

The Indian economy is growing at a rocket pace, and while so many financial transactions are flowing, the Income Tax Department has come up with some effective changes that will ease things out for the taxpayer in question. The Finance Bill seeks to render it lighter by changing the tax rates, increasing the scope of deductions, and smoothing our taxation law, among other things. So, here's what you need to know.

 

1. Tax Slabs Revised!

Let's talk first about the new income tax slabs for the individual taxpayer and the salaried one. Here are the revised slabs that will be implemented for the assessment year 2025–26:
 

Total Income (Rs.)	    | Rate of Tax
-----------------------------------
Up to 3,00,000	        |   Nil
3,00,001 to 7,00,000	|    5%
7,00,001 to 10,00,000	|   10%
10,00,001 to 12,00,000	|   15%
12,00,001 to 15,00,000	|   20%
Above 15,00,000	        |   30%

 

This change will save salaried workers as much as ₹17,500 in taxes! ???? Cha-ching!

 

2. Standard Deduction Went Up!

WAKE-UP CALL, SALARIED! Standard deduction now increased to ₹75,000, which was ₹50,000. A little more dough in your pocket, folks. Mark those calendars, as that comes into effect on April 1, 2025.

 

3. The higher family pension deduction is also winding down.

Good news, family pensioners! Now, the deduction from the family pension shoots up from ₹15,000 to ₹25,000. More money, less tax—who can say no to that? This change also comes into effect on April 1, 2025.

 

4. Pension Contributions Made Better

You'll love this if you are an employer! The deduction for employer contributions to a pension scheme increases from 10% to 14%. That is to say, more benefits for your employees and a smooth tax ride for you starting April 1, 2025.

 

5. Lower Corporate Tax for Foreign Companies

For our international friends, the corporate tax rate is on a downhill trajectory from 40% to 35%. Yep, it's the time when that welcome mat needs to be rolled out for foreign companies!

 

6. Sayonara(Goood bye), Angel Tax!

The Angel Tax, infamously known as the tax, is being knocked out as of April 1st, 2025. That means fewer headaches for the startups and the investors as well. The entrepreneurial spirit's huge win!

 

7. Set Sail for Tax Benefits!

This will boost the country's domestic cruise operations and bring cruise tourism to India. The budget is looking into enhancing tourism, which should, in turn, support the economy.

 

8. Merge Charitable Trusts

With the government planning to merge two regimes into one for tax exemption for charitable trusts, they appear to be welcoming some simplification of matters concerning trust management.

 

9. Capital Gains Made Simpler

Hold on to your hats because capital gains taxation is being restructured! Holding periods are being harmonized to one year for listed securities and 24 months for other assets. This makes less confusion translate into better clarity for taxpayers.

 

10. Short and Long-Term Capital Gains Tax Changes

It will increase the short-term capital gains on STT paid equity stocks up to 20%, and long-term capital gains will attract a flat rate of 12.5%. In addition, the limit for exemption for long-term capital gains on specified assets is ₹1.25 lakh. Clearer calculations? Yes, please!

 

11. Rate Revised for Securities Transaction Tax (STT)

Presently, the following is the STT Rate for Securities;

Securities Options: 0.0625% of the option premium; Securities Futures: 0.0125% of the trading price; Equity Shares: 0.1% on both purchase and sale transactions; Exercised Options: 0.125% of the intrinsic value (difference between the agreement price and the strike price). Considering the tremendous increase in the derivative market, it is proposed to enhance the STT rates w.e.f. October 1, 2024:

Options: 0.0625% to 0.1%

Futures: 0.0125% to 0.02%

 

12. Reduction in Tax Deducted at Source (TDS) Rate

To further ease the business of doing, the following TDS rates are proposed to be reduced with effect from the respective dates:-

Description	                                  |  Present TDS Rate	|  Proposed TDS Rate
------------------------------------------------------------------------------------------
194D Insurance Commission	                  |         5%	        |       2%	
194DA Life Insurance Policy	                  |         5%	        |       2%	
194G Lottery Ticket Sales	                  |         5%	        |       2%	
194H Commission or Brokerage	              |         5%	        |       2%	
194IB Rent by Certain Individuals or HUF      |         5%	        |       2%	
194M Certain Payments by Individuals or HUF   |         5%	        |       2%	
194O Payments by E-commerce Operators	      |         1%	        |     0.1%	
194F Buy Back of Units	                      |      Omitted	    |      Nil

 

13. Simplification of Credit for TCS Collected/TDS Deducted by Salary Earner

To simplify the process of tax deduction from salary earners, it is proposed to amend Section 192 so that TCS would also flow within it and all the TDS would be deducted for revenue purposes. This would, thus, ease out compliance and avoid cash flow hassles among the salary earners, with effect from October 1, 2024.

 

14. Increasing compensation payable to Working Partners

It is proposed to insert, with effect from 1.4.2025, Section 40. So that, out of book profits of the year, there is a loss of 3 lakh, or 90 percent of such book profits. Whichever is greater, an amount equal to the first 6 lakh would be excluded for determining the deductions allowable from such book profits. Only the balance book profits shall be deductible at 60 percent under the provisions of Section 40. 40.

Any amount paid by an Indian company towards the buyback of shares will be treated as distributed dividends and taxable accordingly.

Capital losses will accrue at the cost of the acquisition of shares on October 1, 2024.

 

15. TDS under Section 194T

Section 194T of the new TDS provision would impose a 10% tax on the remuneration, interest or bonuses paid by the firm to its partners on payments greater than ₹20,000. This would start on April 1, 2025.

 

16. TCS on Luxury Goods

Amend Section 206C, introducing TCS on luxury goods, wherein a sale consideration of ₹10 lakh attracts TCS. This would be effective as of January 1, 2025.

 

17. Exclusion of Certain Amounts under Section 194J from the Purview of Section 194C

The Bill categorically clarifies that professional fees falling within Section 194J are not “work” within Section 194C. This amendment will take effect from the date of October 1, 2024.

 

18. Notification of the Direct Tax Vivad Se Vishwas Scheme, 2024

The new scheme is to settle disputed tax arrears with taxpayers. It will be effective on a date to be notified by the Central Government.

 

19. Withdrawal of Equalization Levy

From August 1, 2024, the 2% equalization levy will not be levied on e-commerce transactions.

 

20. Amendment in Section 276B regarding Decriminalization

Proposed amendments shall provide immunity from prosecution under Section 276B in case the tax deducted is paid by October 1, 2024, to the Central Government before the due date for filing.

 

21. Block Assessment Provisions

Block assessment provisions to make the assessment process of search cases more efficient shall be introduced with effect from September 1, 2024.

 

22. Rationalization of Assessment and Reassessment Provisions

Reopening assessments will only be allowed beyond three years if the escaped income is ₹50 lakh or more. The proposed maximum period of six years or five years for reopening assessments is to be effective from September 1, 2024.

 

The Union Budget 2024–25 makes changes in various directions, with the objective of making the tax process easy and enhancing investment and a stride for the economy. It has been for the taxpayer to see the changes and have to adjust their financial planning.