8 Key Income Tax Changes in 2024 to Keep in Mind for ITR Filing in 2025

8 Key Income Tax Changes in 2024 to Keep in Mind for ITR Filing in 2025

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:

1. Updated Income Tax Slabs under the New Tax Regime

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.

2. Increased Standard Deduction Limits

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.

3. Enhanced Employer Contribution to NPS

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.

4. Revised Long-Term Capital Gains Tax Rates

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.

5. Revised Short-Term Capital Gains Tax Rates

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.

6. Adjustments to Capital Gains Tax on Immovable Property

  • The tax rate for LTCG on immovable property has been reduced from 20% to 12.5%, but indexation benefits will no longer apply.

  • 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.

7. Simplified Holding Periods for Capital Gains

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.

8. Increased Securities Transaction Tax (STT)

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.

Read More: A Guide to Belated Returns, Revised Returns, and ITR-U

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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How to Calculate and Pay Advance Tax for Corporates

Advance Tax

How to Calculate and Pay Advance Tax for Corporates

Advance Tax

Advance tax, often referred to as “pay-as-you-earn,” is the income tax payable in advance as per the provisions of the Income Tax Act. Sections 208 and 209 of the Income Tax Act outline the rules and computation methods for advance tax. This guide provides an overview of advance tax for corporates, the instalments involved, steps for online payment, and the consequences of non-payment or delayed payment.

Basics of Advance Tax for Corporates

Advance tax is mandatory for corporates with an estimated tax liability of INR 10,000 or more for the financial year. According to Rule 125 of the Income Tax Rules, corporate taxpayers must pay their taxes, including advance tax, electronically.

Advance tax is calculated on the estimated tax liability for the financial year. The following steps outline the computation process:

  1. Estimate Total Income: Calculate the total income under all heads for the financial year.

  2. Apply Deductions and Exemptions: Deduct all eligible tax credits, exemptions, rebates, and deductions from the total income.

  3. Determine Taxable Income: Subtract deductions from the total income to compute taxable income.

  4. Compute Tax Liability: Apply the applicable income tax rate to the taxable income and account for Tax Deduction at Source (TDS). The resulting figure is the advance tax payable.

Instalments of Advance Tax for Corporates

  1. Corporates are required to pay advance tax in four instalments as outlined below:

    InstalmentDue DatePercentage of Estimated Tax Liability
    First15th June15%
    Second15th September45% (less the amount paid earlier)
    Third15th December75% (less the amount paid earlier)
    Fourth15th March100% (less the amount paid earlier)

    Key Points:

    • Any tax payment made by 31st March qualifies as advance tax.

    • If the due date falls on a bank holiday, the next working day is considered the last day for payment.

Steps for Online Payment of Advance Tax for Corporates

Follow these steps to pay advance tax online:

  1. Visit the Income Tax Portal: Go to https://www.incometax.gov.in/iec/foportal/.

  2. Access e-Pay Tax: Under Quick Links, select ‘e-Pay Tax’.

  3. Enter PAN Details: Provide the company’s PAN and confirm it by re-entering. Enter the mobile number and click ‘Continue’.

  4. Authenticate: Enter the OTP received on the registered mobile number.

  5. Select Tax Type: Choose ‘Income Tax’ and click ‘Proceed’.

  6. Enter Tax Details: Fill in details such as tax amount, surcharge, cess, interest, penalty, and others. Click ‘Continue’.

  7. Choose Payment Mode: Select the payment mode and bank, then click ‘Continue’.

  8. Verify and Pay: Review the challan details in the preview, verify, and click ‘Pay Now’.

Advance Tax

Consequences of Non-Payment or Delayed Payment

Failure to pay advance tax or delayed payment attracts interest under Sections 234B and 234C of the Income Tax Act:

  1. Interest under Section 234B:

    • Levied at 1% per month if at least 90% of the advance tax is not paid by 31st March.

  2. Interest under Section 234C:

    • Levied at 1% per month for delays in instalments as detailed below:

Read More: A Guide to Belated Returns, Revised Returns, and ITR-U

Instalment DueInterest PeriodInterest Calculated on
15% by 15th June3 months15% of total tax – tax paid till 15th June
45% by 15th September3 months45% of total tax – tax paid till 15th September
75% by 15th December3 months75% of total tax – tax paid till 15th December
100% by 15th March1 month100% of total tax – tax paid till 15th March

By adhering to these provisions, corporates can avoid penalties and ensure compliance with tax laws.

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Highlights and Updates from the 55th GST Council Meeting

Highlights and Updates from the 55th GST Council Meeting

The 55th GST Council meeting, held on December 21, 2024, in Jaisalmer, Rajasthan, was chaired by the Union Finance Minister. Attendees included the Union Minister of State for Finance, several Chief and Deputy Chief Ministers, State Finance Ministers, and senior officers from the Ministry of Finance and State/UT governments.

Key Decisions from the 55th GST Council Meeting

Extensions and Exemptions:

  • Group of Ministers (GoM) Extensions: The GoMs on compensation cess, rate rationalization, and health insurance have been granted extensions to submit their reports.

  • GST Exemption for Payment Aggregators: Payment aggregators handling payments below ₹2,000 are now exempt from GST. This exemption does not extend to payment gateways or fintech services that facilitate fund settlements.

  • Penal Charges: Penal charges levied by banks and NBFCs on borrowers for non-compliance with loan terms will no longer attract GST.

  • Agricultural Products: Dried black pepper and raisins supplied directly by agriculturists are now exempt from GST.

GST Rate Adjustments:

  • Fortified Rice Kernels (HSN 1904): GST reduced from 18% to 5%.

  • Gene Therapy: Treatments for life-threatening diseases are now GST-exempt.

  • Caramelized Popcorn: Clarified to attract GST at 18%, aligning with products containing added sugar. Salted popcorn remains taxed at 5%.

  • Electric Vehicles (EVs):

    • No GST on the sale of used EVs between individuals.

    • 18% GST on the margin value for businesses selling refurbished EVs.

  • Merchant Exporters: Compensation cess on supplies to merchant exporters reduced to 0.1%.

  • LRSAM Sub-Systems and Software (HSN 9023): Exempted from GST.

  • Inspection Equipment for IAEA: Imports by the International Atomic Energy Agency are now exempt from IGST, subject to specified conditions.

Deferred Decisions:

  • Food Delivery Services: Deliberations on GST rates for food and associated delivery charges by quick commerce and food delivery apps were postponed.

  • Health and Life Insurance: Discussions on reducing GST rates for health and life insurance premiums are ongoing.

Legislative Amendments and Compliance Measures:

  • Invoice Management System (IMS): Proposed amendments to the CGST Act and Rules aim to streamline the generation of FORM GSTR-2B and ensure reconciliation between suppliers and recipients.

  • Credit Note Adjustments: New provisions for credit note-related input tax credit (ITC) reversals and output tax liability adjustments.

  • Late Fee Waivers:

    • Waiver of late fees for delayed filing of FORM GSTR-9C for FY 2017-18 to FY 2022-23, provided filings are completed by March 31, 2025.

    • Circular to clarify late fee applicability for delayed filing of annual returns.

  • Pre-Deposit for Appeals: Pre-deposit reduced to 10% for appeals involving only penalties, without any tax demand.

Expectations and Anticipated Changes:

  • Health Insurance Premiums:

    • Proposals include exempting GST on term life insurance and senior citizens’ health insurance premiums.

    • Reducing GST rates from 18% to 5% for health insurance premiums under specified conditions.

  • Inverted Duty Structure Reforms: Addressing tax rate disparities between raw materials and finished goods to ease ITC accumulation and improve liquidity.

  • Tobacco Products and High-End Goods: Possible introduction of special rates (including cess) for items like tobacco, cosmetics, luxury garments, and aerated beverages.

  • ATF and Petroleum Products: Ongoing discussions on including aviation turbine fuel (ATF) under GST to enable input tax credit claims by petroleum companies.

  • Compensation Cess: Examining the applicability and future roadmap of the cess, especially for utility vehicles and specific luxury goods.

 

Read More: A Guide to Belated Returns, Revised Returns, and ITR-U

Compliance Enhancements:

  • Risk-Based GST Registration: Strengthened measures, including Aadhaar-based authentication and categorization of taxpayers based on risk profiles, to curb fraudulent registrations.

The 55th GST Council meeting underscored its commitment to refining GST policies, addressing industry concerns, and promoting clarity and compliance. Future notifications and circulars will implement these decisions, further shaping the GST framework in India.

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