CA Jaydeep Babubhai Vadher
Introduction
This circular provides details regarding income-tax deduction from salaries for the financial year 2024-25 under Section 192 of the Income-tax Act, 1961 ("the Act"). It includes amendments introduced by the Finance (No.2) Act, 2024, Finance (No.1) Act, 2024, and Finance Act, 2023. In cases where no amendments have been made, Circular No. 24/2022 dated 07.12.2022 remains applicable. Relevant Acts, Rules, Forms, and Notifications are available at the Income Tax Department.
Amendments in Salary Definition
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Salary Definition (Section 17(1))
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Includes contributions by the Central Government to the Agniveer Corpus Fund under Section 80CCJJ.
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Perquisites (Section 17(2))
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Includes rent-free accommodation and concessional-rate accommodation provided by the employer.
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Surcharge Rates under the Old Tax Regime
The applicable surcharge rates under the old tax regime are as follows:
| Total Income | Surcharge Rate |
|---|---|
| More than Rs 50 lakh up to Rs 1 crore | 10% |
| More than Rs 1 crore up to Rs 2 crore | 15% |
| More than Rs 2 crore up to Rs 5 crore (excluding dividend income) | 25% |
| More than Rs 5 crore (excluding dividend income) | 37% |
| More than Rs 2 crore (including dividend income) | 15% |
Tax Rates under the New Tax Regime (FY 2024-25)
| Total Income | Tax Rate |
| Up to Rs 3,00,000 | Nil |
| Rs 3,00,001 to Rs 7,00,000 | 5% |
| Rs 7,00,001 to Rs 10,00,000 | 10% |
| Rs 10,00,001 to Rs 12,00,000 | 15% |
| Rs 12,00,001 to Rs 15,00,000 | 20% |
| Above Rs 15,00,000 | 30% |
Additional provisions apply for computing total income under the new tax regime, including restrictions on exemptions and deductions.
TDS on Salary (Section 192(2B))
Employees with income under other heads (except house property loss) or tax deductions/collections under other provisions may provide details to their employer for TDS adjustment.
Amendments in Form No. 16 and Form No. 24Q
- Form No. 16: Updated under the Income-tax (Eighth Amendment) Rules, 2024, effective from 15.10.2024.
- Form No. 24Q: Changes include replacing "Education Cess" with "Health and Education Cess" and adding a new column for additional TDS details.
Valuation of Perquisites (Rule 3)
Amendments in the valuation of perquisites related to employer-provided accommodation and remote area definitions include:
Accommodation Provided by Employer:
- Owned accommodation: 5% to 10% of salary based on city population.
- Leased accommodation: Lower of actual lease rental or 10% of salary.
Definition of "Remote Area": Now excludes areas within 30 km of municipalities with a population of 1 lakh or more (as per the 2011 Census).
Leave Encashment Exemption
The exemption for leave encashment for non-government employees at retirement has been increased to Rs. 25,00,000.
Agniveer Corpus Fund Exemption
Payments from the Agniveer Corpus Fund under the Agnipath Scheme are exempt under Section 10(12C) of the Act.
Rebate under Section 87A
- For income up to Rs. 5,00,000, the rebate is Rs. 12,500.
- Under the new tax regime, for income up to Rs. 7,00,000, the rebate is Rs. 25,000.
Conclusion
These amendments significantly impact tax deduction calculations for salaried employees for the financial year 2024-25. Employers and employees should ensure compliance with the updated provisions.
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