Income Tax Changes for Fiscal Year 2024-25 to Take Effect in 2025
Significant changes to income tax regulations are slated to come into effect in 2025, following the conclusion of the 2024 fiscal year. Finance Minister Nirmala Sitharaman's 2024-25 budget included various amendments to income tax rules that will impact taxpayers. Let's examine these changes in detail:
1. Revised Income Tax Slabs
The budget introduced new income tax slabs. Tax rates will now be 5% on income between ₹3 lakh and ₹7 lakh, 10% on income between ₹7 lakh and ₹10 lakh, 15% on income between ₹10 lakh and ₹12 lakh, 20% on income between ₹12 lakh and ₹15 lakh, and 30% on income exceeding ₹15 lakh. These changes are expected to provide salaried individuals with tax savings of up to ₹17,500.
2. Increased Exemption Limits
The new tax slabs now exempt income up to ₹7 lakh from taxation, an increase from the previous limit of ₹5 lakh. Furthermore, the exemption limit under Section 87A has also been raised to ₹7 lakh. Taxpayers retain the option of choosing the previous tax slab structure if desired.
3. Enhanced Standard Deduction Limit
The standard deduction limit has been raised from ₹50,000 to ₹75,000. The deduction for family pension has also been increased from ₹15,000 to ₹25,000. These adjustments will benefit salaried and pensioned individuals by allowing for greater tax savings.
4. Modified TDS Rates
TDS rates have also undergone revisions. TDS rates for e-commerce operators have been lowered from 1% to 0.1%, for life insurance from 5% to 2%, and for rent from 5% to 2%.
5. Reduced Surcharge
Previously, a surcharge of up to 37% applied to the highest tax slab. This has been lowered to 25%. As a result, the tax rate on income exceeding ₹5 crore will decrease from 41.744% to 39%.
6. Adjustments to LTCG and STCG Taxes
Effective from the financial year 2024-25, long-term capital gains (LTCG) will be taxed at 12.5%, and short-term capital gains (STCG) at 20%, an increase from the previous rate of 15%. The LTCG tax exemption limit has been raised from ₹1 lakh to ₹1.25 lakh.
7. TDS on Property Sales
A 1% TDS will apply to property transactions exceeding ₹50 lakh. However, if the property value falls below the individual's personal limit, TDS will not be applicable.
8. TCS on Luxury Goods
TCS of 1% will be levied on luxury goods exceeding ₹10 lakh, effective January 1, 2025. This policy may apply to designer handbags, luxury watches, and other similar items.
9. Simplified TCS Credit Claiming
Salaried individuals will now be able to claim TCS credit for overseas education expenses for their children. This rule will take effect from January 1, 2025.
10. Dispute Resolution Scheme 2.0
This scheme, effective from October 1, 2024, offers taxpayers an opportunity to resolve outstanding tax disputes. Applications must be submitted by December 31, 2024, to benefit from this scheme.
11. New Tax Rules on Share Buybacks
Beginning October 2024, proceeds from share buybacks will be subject to income tax based on the applicable tax slabs.
12. TDS on RBI Floating Rate Bonds
TDS on floating rate bonds will apply from October 1, 2024. If the annual income exceeds ₹10,000, TDS will be applicable.
13. Penalties for Delayed ITR Filing
Penalties will be levied for delayed ITR filing by December 31, 2024. A penalty of up to ₹5,000 may apply to individuals with income exceeding ₹5 lakh.
14. Increased NPS Contribution Limit
The employer's contribution limit to NPS has increased from 10% to 14%.
15. TDS Relief on Salary
TDS or TCS from other income sources, such as interest or rent, can now be claimed against TDS deducted from salary.
These changes will impact your tax liabilities beginning in 2025, potentially resulting in tax relief in several areas.
