The income tax framework in India has undergone significant revisions in 2024, aligning with the government’s goals of enhancing compliance and simplifying tax obligations. These updates are pivotal for individuals and corporations as they prepare to file their Income Tax Returns (ITRs) in 2025. Here are the eight critical changes you need to know:
The government has revised the income tax slabs in the new tax regime to offer greater savings to individual taxpayers. These updated slabs for FY 2024-25 aim to make the regime more attractive and taxpayer-friendly.
Under the new tax regime, the standard deduction has been raised:
From ₹50,000 to ₹75,000 for salaried individuals.
For family pensioners, the deduction has increased from ₹15,000 to ₹25,000.
It’s important to note that the standard deduction limits under the old tax regime remain unchanged for FY 2024-25.
The deduction for employer contributions to the National Pension System (NPS) has been raised from 10% to 14% of the basic salary under Section 80CCD(2) of the Income Tax Act. This benefit is exclusive to the new tax regime and adds to the limited deductions available, alongside the standard deduction.
The tax rate for long-term capital gains (LTCG) on specific assets has been increased:
From 10% to 12.5% for listed equity shares, units of equity-oriented funds, and business trusts subject to Securities Transaction Tax (STT).
The exemption threshold under Section 112A for LTCG has been raised from ₹1 lakh to ₹1.25 lakh.
Short-term capital gains (STCG) under Section 111A, applicable to STT-paid equity shares, units of equity-oriented mutual funds, and business trusts, will now be taxed at 20%, up from the previous rate of 15%. Other STCGs continue to be taxed at applicable slab rates.
Taxpayers can choose between taxing LTCG at 12.5% without indexation or at 20% with indexation, depending on which is more beneficial.
The holding period for determining LTCG on immovable property remains at 24 months.
These changes apply to properties acquired before July 23, 2024.
The Finance Act 2024 has standardized holding periods to simplify the classification of short-term and long-term capital gains:
For listed securities (including units of listed business trusts): Holding period exceeds 12 months.
For all other assets: Holding period exceeds 24 months.
The holding period for bonds, debentures, and gold has been reduced from 36 months to 24 months.
For unlisted shares and immovable property, the holding period remains 24 months.
Effective October 2024, the STT for equity derivatives has increased:
On futures: From 0.0125% to 0.02%.
On options: From 0.0625% to 0.1%.
This revision impacts the cost of trading in the derivatives market, which will affect taxpayers engaged in capital market activities. The STT amount is factored into capital gains calculations, influencing the final tax liability.
These income tax changes for FY 2024-25 underscore the government’s commitment to streamlining the tax system while ensuring higher compliance. Taxpayers—individuals and businesses alike—must familiarize themselves with these updates to optimize their tax planning and avoid potential pitfalls during the ITR filing process in 2025.
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