Key Amendments Proposed by the Finance Act (No. 2), 2024 under Income-tax Act, 1961

Key Amendments Proposed by the Finance Act (No. 2), 2024 under Income-tax Act, 1961

The Union Budget 2024-25 introduces significant changes in the Direct Tax regime, aimed at simplifying taxation and offering more benefits to taxpayers. Below are the major proposals:

Default Tax Regime (Section 115BAC)

1. Revised Tax Slabs: The income tax rates under the default regime are modified as follows:
   • Income up to ?3,00,000: Nil
   • ?3,00,001 to ?7,00,000: 5%
   • ?7,00,001 to ?10,00,000: 10%
   • ?10,00,001 to ?12,00,000: 15%
   • ?12,00,001 to ?15,00,000: 20%
   • Above ?15,00,000: 30%
2. Increased Standard Deduction: For salaried employees, the standard deduction is proposed to increase from ?50,000 to ?75,000.
3. Higher Family Pension Deduction: The deduction limit for family pensions is raised from ?15,000 to ?25,000.
4. Enhanced Employer Contributions to NPS: For non-government employees, the employer’s contribution to the New Pension Scheme (NPS) is raised to 14% of the employee's salary.

Capital Gains Taxation

1. Higher Tax on Short-Term Capital Gains (STCG): The tax rate on short-term gains on specified financial assets like equity shares and mutual funds is increased from 15% to 20%.
2. Uniform Tax on Long-Term Capital Gains (LTCG): A flat rate of 12.5% is proposed for long-term capital gains on all financial assets (except unlisted bonds and debentures).
3. Increased Exemption on LTCG: The exemption limit on long-term capital gains is increased from ?1 lakh to ?1.25 lakh.

Business Income

1. Higher Deduction on Partner Remuneration: For firms, the deduction limit for remuneration to working partners is proposed to increase, with a new calculation based on book profits.
2. Tax on Residential Letting: Income from letting out residential property will be taxable as income from house property, not business income.
3. Abolition of Angel Tax: To encourage startups, the tax on excess share consideration (angel tax) is proposed to be abolished.

Tax on Buy-back of Shares

• Income from the buy-back of shares will be treated as dividend income in the hands of shareholders, subject to 10% TDS.

Charitable Trusts and Institutions

• A simplified regime for tax exemptions will merge two existing systems, reducing the administrative burden and making the process more streamlined.

Tax Deducted at Source (TDS) and Tax Collected at Source (TCS)

1. Reduced TDS Rates: Various TDS rates are proposed to be reduced from 5% to 2%, with specific rates for e-commerce operators being reduced to 0.1%.
2. New TDS on Payments made to Partner: A new section proposes TDS @ 10% on salary, remuneration, or interest payments to firm partners if the amount exceeds ?20,000 in a financial year.
3. TCS on Luxury Goods: A 1% TCS is proposed on luxury goods worth more than ?10 lakhs.

International Taxation

1. Reduced Tax for Foreign Companies: The tax rate for foreign companies is reduced from 40% to 35%.
2. New Scheme for Cruise Ship Operators: A presumptive income scheme is introduced for non-resident cruise operators, with income taxed at 20% of receipts.
3. Withdrawal of Equalisation Levy: The 2% equalisation levy on e-commerce services will be withdrawn starting August 2024.

Search Assessments and Appeals

1. Reintroduction of Block Assessments: A scheme of block assessments for search and seizure cases is reintroduced, with a tax rate of 60% on concealed income and a 50% penalty for non-disclosure.
2. Time Limit for Appeals: The time limit for filing appeals with the ITAT is revised to two months from the date the order is communicated.