Income Tax Highlights: 2024 Year-End Review

As the year wraps up, crucial changes to income tax regulations and policies have been unveiled in the Union Budget 2024-25, impacting individual taxpayers and corporations. The Union Budget 2024 has implemented several noteworthy modifications to India's income tax framework to improve taxpayer advantages and streamline compliance. Below are the key points from this year's updates:

TDS on Floating Rate Bonds

• Section 193 of the Income Tax Act, 1961 - Deduction of tax at source on payment of any income to a resident by way of interest on securities
• Applicable TDS rate - 10% on the income earned on Floating Rate Bonds
• Exemptions - No TDS will be deducted if the total income earned from these bonds in a financial year is less than ₹10,000.
• Applicable on - Floating Rate Savings Bonds (FRSB) 2020 (Taxable) & Any security of Central & State Government
• Impact - Assessees earning over ₹10,000 from these bonds will face increased tax liability, leading to a reduction in net return.

Revised TDS Rates

TDS rates have been reduced for certain sections -

Direct Tax Vivad Se Vishwas Scheme

The VSV 2.0 or DTVSV 2024 The Union Government has introduced a scheme with effect from October 1, 2024, to settle tax-related disputes that are pending before the Appellate authorities, High Court, Supreme Court, Dispute Resolution Panel and revised applications filed before Income Tax Commissioner.

Rules for -

New Appellants: Lower settlement amounts for those filing after July 22, 2024

Old Appellants: Standard settlement amounts for those with pending appeals as of July 22, 2024

The last date to avail the scheme is December 31, 2024.

Higher Securities Transaction Tax (STT)

As per the Budget 2024, the Securities Transaction Tax (STT) has been increased on futures and options (F&O) trading.

Currently, STT on delivery trades in equity shares is at 0.1% on both purchase and sale transactions and STT on the sale of an option in securities where the option is exercised is at 0.125% of the intrinsic price.

STT rates for-

• The sale of an option in securities will be increased from 0.0625% of the option premium to 0.1% of the option premium.
• The sale of a future in securities will be increased from 0.0125% of the price at which such futures are traded to 0.02% of the price at which such futures are traded.

Capital Gains Taxation

• The capital gains exemption limit for equity shares and equity-oriented mutual funds in India has been increased to ₹1.25 lakh per year, designed to assist lower and middle-income groups.
• Long-term capital gains (LTCG) on certain assets will see an increase in the tax rate to 12.5%, up from the previous rate of 10%.
• Additionally, short-term capital gains (STCG) on specific financial assets will be taxed at a rate of 20%.

Revised Income Tax Slabs under the New Tax Regime

The new tax regime has been updated to provide relief to taxpayers:

Reduction in Surcharge Rates

The Union Budget 2024 implemented notable adjustments to the surcharge rates under the new tax regime which was especially advantageous for high-income earners.

Revised Surcharge Rates

• The maximum surcharge rate has been lowered from 37% to 25% for individuals and entities earning more than ₹5 crore.
• This adjustment is intended to enhance the appeal and inclusivity of the new tax regime for individuals and entities with higher earnings.

Abolition of Angel Tax

The Union Budget for 2024-25 provided substantial relief to the Indian startup ecosystem by abolishing the "angel tax." This tax, previously outlined in Section 56(2)(viib) of the Income Tax Act of 1961, imposed a 30% tax on the share premium that unlisted companies received above their fair market value.

The Impact of Abolishing Angel Tax:

• Boost Startup Funding
• Enhanced Global Competitiveness
• Fostering Innovation
• Valuation Challenges
• Regulatory Oversight

Higher Securities Transaction Tax (STT)

• As per the Budget 2024, the Securities Transaction Tax (STT) has been increased on futures and options (F&O) trading.
• Currently, STT on delivery trades in equity shares is at 0.1% on both purchase and sale transactions and STT on the sale of an option in securities where the option is exercised is at 0.125% of the intrinsic price.
• STT rates for-

1. The sale of an option in securities will be increased from 0.0625% of the option premium to 0.1% of the option premium.
2. The sale of a future in securities will be increased from 0.0125% of the price at which such futures are traded to 0.02% of the price at which such futures are traded.

Corporate Taxes on Foreign Companies

Corporate taxes are levied on a company's net income or profit. In the 2024 Budget, Finance Minister Nirmala Sitharaman proposed lowering the corporate tax rate for foreign companies from 40% to 35%.

These modifications demonstrate a dedication to fostering inclusivity and financial adaptability within India's tax framework. By adjusting tax slabs, enhancing deductions, and lowering surcharge rates, the government seeks to offer significant relief to middle-class taxpayers, while also promoting compliance and stimulating economic growth. In conclusion, the income tax reforms implemented in 2024 are intended to establish a fairer taxation environment, enhancing financial security for taxpayers and contributing to larger economic goals.

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