Income Tax Updates 2024-25- A Guide for Taxpayers in India
Smt. Nirmala Sitharaman, India's Finance Minister, has proposed specific new changes to the income tax laws in the 2023 budget. Beginning with the upcoming fiscal year (FY 2024–25), there will be a few notable changes. The implementation of those amendments is scheduled for April 1, 2024. The corresponding modifications will take effect on April 1, 2024, and will add new rules or revisions to the current ones. The default tax system is the same new tax regime that has been implemented. Beginning on April 1, 2023, taxpayers will have the option to choose between the new tax regime, which will be the default tax system for FY 2023–24, and the existing tax regime. The taxpayers will be impacted by a few significant changes in the same fiscal year. In this guide, we will explain the latest income tax updates in detail.
Table of Content
A Teaser of the Latest Updates
2024 Interim Budget –
The current direct and indirect tax rates were preserved in the budget.
Individuals who earn less than Rs 7 lakh are not required to pay taxes.
Additionally, "tax dispute" up to Rs 25,000 for the period up to the 2009–10 fiscal year and Rs 10,000 for the fiscal years 2010–11 through 2014–15 is withdrawn by Finance Minister Nirmala Sitharaman.
Updates on the Budget for 2023
A tax refund is available to anybody making up to Rs 7 lakh each year.
The default tax system will be the new IT regime. Taxpayers may, however, choose not to participate in the new system before the deadline for submitting their IT returns for the relevant assessment year.
In the new tax system, the following will be the new tax slabs:
Income Range | Tax Rate |
Upto Rs. 3,00,000 | Nil |
Rs. 3,00,000- Rs. 6,00,000 | 5% |
Rs. 6,00,000- Rs. 9,00,000 | 10% |
Rs. 9,00,000- Rs. 12,00,000 | 15% |
Rs. 12,00,000- Rs. 15,00,000 | 20% |
Above Rs. 15,00,000 | 30% |
Pensioners and salaried workers are eligible for a standard deduction of Rs 50,000 under the new tax system.
TDS rate dropped from 30% to 20% upon EPF withdrawal.
The highest surcharge for individuals earning more than Rs 5 crore has been lowered from 37% to 25% under the new tax system. Their tax rate is reduced by this action from 42.74% to 39%.
The amount of leave that non-government employees can encash has been raised from Rs 3 lakh to Rs 25 lakh.
Basics of Income Tax: A Guide for Beginner Taxpayers
Understanding Income Tax
The central government imposes income tax, a form of tax, on the money that people and businesses make throughout a fiscal year. The government receives funding via taxes. The government uses these funds for infrastructure development, healthcare, education, farmer and agricultural sector subsidies, and other government welfare programmes. There are two primary categories of taxes: indirect taxes and direct taxes. A direct tax is one that is imposed directly on income; income tax is one type of direct tax. The income slab rates in effect for that fiscal year serve as the basis for the tax computation. Individuals, Hindu Undivided Families (HUFs), and other taxpayers who are not businesses are required to pay income tax on their received income. The rate at which this type of income is taxable is set by legislation.
Types of Taxpayers
All Indian citizens, whether they are residents or not, are required by the Income Tax Act to file income tax returns. According to the new tax regime, tax is currently due whenever income surpasses Rs 3 lakh in a financial year. The Income Tax Act divides taxpayers into a number of groups. Certain categories of taxpayers are subject to varied tax laws. The taxpayer categories include taxpayers, Hindu Undivided Family (HUF), organisations, businesses, Body of Individuals (BOI), Association of Persons (AOP), Local Authority, and Artificial Judicial Persons.
In addition, there are two categories for individuals and HUFs: residents and non-residents. Residents of India are required to pay taxes on their worldwide income, which includes money earned both domestically and overseas. In the meanwhile, non-residents are only required to pay taxes on income that is generated or accumulated within India. For tax purposes, each financial year's residence status must be assessed individually for each person's duration of stay in India. For taxation purposes, residents are further divided into the following categories:
Individuals under the age of 60
Individuals who are over 60 but under 80 years old
Individuals over the age of 80
Heads of Income
Income tax is imposed on all individuals who get money in India, regardless of whether they are citizens or not. The Income Tax Department divides income into five primary heads for easier classification:
Income from salaries: Under this category of income, pension and salary income is subject to taxation.
Income from business or profession: This head applies to profits received by self-employed people, businesses, independent contractors, freelancers, and life insurance agents as well as income received by professionals such as tuition teachers, chartered accountants, doctors, and lawyers in private practice.
Income from house property: Under this head of income, rental income from real estate is taxable.
Income from capital gains: This head of income taxes revenue from the sale of a capital asset, such as shares, mutual funds, real estate, etc.
Income from other sources: This category of income includes taxable income from savings bank account interest, fixed deposit income, and lottery winnings.
Tax Slabs and Tax Regimes
The income tax regulations in India impose separate taxes on each of these taxpayers. A person or group that assesses their income and pays taxes in accordance with the Income Tax Act is known as an assessee. An association of persons (AOP), a trust, a partnership firm, an individual, etc. can all be the assessee. Tax slabs, often known as tax brackets, are collections of people's income. Additionally, the tax rate varies for each tax level. With an increase in taxable income comes an increase in the tax rate.
Financial Year and Assessment Year
For accounting and financial reporting purposes, the taxpayers use a one-year term known as the financial year. This is the year that money is earned. As per the Income Tax Act, this time frame spans from April 1st of the current year to March 31st of the subsequent year. The acronym for it is "FY". For instance, FY 2023–24 can be used to refer to the fiscal year that begins on April 1, 2023, and ends on March 31, 2024.
An assessment year is a one-year period that begins immediately after the fiscal year and runs from April 1 to March 31. Since all taxpayers must assess their income from the previous fiscal year and pay taxes this year, this time frame is known as the assessment year. For instance, the assessment year for revenues received in FY 2023–2024 will be AY 2024–2025.
PAN and TAN
The acronym for the Permanent Account Number is PAN. It is a special 10-digit alphanumeric number that Indian taxpayers are given by the Income Tax Department. A person's distinct permanent account number is used to track all of their tax-related transactions and data. The PAN number must be mentioned while paying advance tax or self-assessment tax. Additionally, a person gives his PAN to banks, mutual fund firms, and other businesses. Through PAN, the income tax department receives financial data from these organisations. This makes it possible for the government to connect the department with all tax-related operations. Therefore, all of your financial transactions can be identified by the department simply by providing a permanent account number.
The acronym for Tax Deduction and Collection Account Number is TAN. It is a special 10-digit alphanumeric number that the Indian Income Tax Department has assigned to you. It is necessary for all individuals in charge of tax deduction (TDS) or collection (TCS) to obtain TANs. In TDS/TCS certifications, any TDS/TCS payment challan, and TDS/TCS returns, the TAN must be quoted.
Old Tax Regime
Three slab rates for income tax levies—5%, 20%, and 30% for various income brackets—were available under the previous tax system. Individuals may continue to file under the previous tax system and deduct the following amounts:
A standard deduction of Rs 50,000.
Deduction for house loan interest.
Deductions from allowances, like the House Rent Allowance (HRA), Leave Travel Concession (LTC), and other allowances.
It is possible to claim deductions for tax-saving investments under Sections 80C (LIC, PPF, NPS, etc.) through 80U.
The following tax slab rates apply to individual taxpayers under the previous tax regime:
New Tax Regime
A new tax system with reduced tax rates and fewer deductions and exemptions for individuals and HUFs was unveiled in the 2020 budget. As a result, many taxpayers chose not to use the new tax structure. The income tax slabs under the new tax regime for FY 2023–24 (AY 2024–25) have been amended as follows, with the intention of encouraging taxpayers to accept the new tax regime in Budget 2023. The new tax regime is regarded as the default regime.
Slabs (Rs.) | Income Tax Rates |
Up to Rs. 3,00,000 | Nil |
Rs. 3,00,001 to Rs. 6,00,000 | 5% (Tax rebate u/s 87A) |
Rs. 6,00,001 to Rs. 900,000 | 10% (Tax rebate u/s 87A up to Rs 7 lakh) |
Rs. 9,00,001 to Rs. 12,00,000 | 15% |
Rs. 12,00,001 to Rs. 15,00,000 | 20% |
Above Rs. 15,00,000 | 30% |
If taxpayers choose the New Tax system, the majority of deductions and exemptions are prohibited. Nonetheless, the following are the exclusions and deductions allowed under the new system:
Transportation reimbursements if a person has a special need.
Conveyance allowance obtained to cover the cost of transportation incurred while working.
Anything paid to cover the expense of a tour or transfer during travel.
Daily stipend received to cover the usual costs or expenses a person incurs due to their absence from regular place of employment.
Exemptions & Deductions Available under the New Tax Regime
Under Section 80CCD (2), your employer may contribute up to 10% of your salary to the NPS [14% if you work for the Central Government].
If a home is rented out, a standard deduction of 30% of net rental income is made.
The interest on a home loan can be deducted from the rental real estate income.
Nevertheless, losses incurred under the House Property account cannot be offset against any other source of income.
Divyang employees would be eligible for a transport allowance exemption to cover their daily travel expenses from work to home.
Conveyance allowance can be used to cover the cost of using a vehicle to carry out official business.
The amount of allowances awarded will cover the employees' travel expenses for tours or transfers.
Daily stipend provided in the event that an employee is absent from their regular place of employment for ordinary daily expenses.
Exemptions & Deductions Not Available under the New Tax Regime
About 70 of the 100 exemptions granted under the new tax system have been cut short by the 2020 budget. Some of the most significant exemptions and deductions that would be lost if the new tax regime slab is selected for tax computation are as follows:
Allowance for House Rent under Section 10 (13A)
Allowance for Leave of Absence as per Section 10 (5)
Food vouchers and other tax-free allowances and privileges under Section 10(14)
Deductions permissible under Sections 80C, 80D, 80TTA, and other provisions of Chapter VI A.
Deduction for interest paid on a home loan under Sections 24(b) and 80EEA for properties owned by oneself
Modification in Tax Rebate Limit
With the implementation of the new tax system, the rebate ceiling will increase. Under the previous tax system, the appropriate tax rebate limit for income up to Rs 5 lakhs was Rs 12500. Under the new tax regime, if the taxable income is less than or equivalent to Rs. 7 lakhs, the same refund will increase to Rs 25,000. There is a section 87A rebate under both income tax regimes. In the budget statement, the taxable ceiling was increased from Rs 5 lakhs to Rs 7 lakhs under the new tax regime.
Changes in the Tax Presumptive Scheme
The presumptive system of taxes, provided by the Tax Council, is a simpler way to figure out the taxable income for particular qualified enterprises or occupations. Under this plan, taxpayers are exempt from keeping meticulous books of accounts and dealing with intricate computations; instead, they are allowed to report their income at a set rate based on predetermined assumptions. The same presumptive tax scheme operates under the previous and new tax regimes.
Benefits of the New Tax Regime
The advantages of the new tax system for taxpayers are listed below:
Since these amendments aim to facilitate tax planning, beginning on April 1, 2024, taxpayers can be relieved of complex tax planning obligations.
With the implementation of the new tax regime, the assesses are exempt from having to keep a record of their airline tickets and rental income.
With the implementation of the income tax rule modifications on April 1, 2024, the basic exemption ceiling was raised from Rs. 2.5 lakhs to Rs. 3 lakhs. This increased exemption ceiling increases the attractiveness of the new tax regime.
Drawbacks of the New Tax Regime
Apart from the benefits of the new tax regime, you must also understand their drawbacks. These include:
You may have to pay more in taxes if you choose not to claim certain important exemptions and deductions, such as the home office deduction (LTA), health care insurance, HRA, and other costs.
Without deductions, you are unable to proactively reduce your tax liability through investments and expenses.
The new tax regime may have higher tax rates than the previous one for individuals whose income exceeds Rs. 10 lakhs, especially when surcharges are imposed for income surpassing Rs. 5 crores.
The new regime might not be the best option for you if you depend on tax-saving tools to build long-term wealth because you will lose out on their advantages.
Income Tax Surcharge for 2023-24
Above the current tax rates, additional taxes are imposed on an individual's income over a predetermined level. This is an additional tax burden that is mostly aimed at those with high incomes. The following is the structure of the surcharge rates:
10% of income tax if total income exceeds Rs. 50 lakh but falls short of Rs. 1 crore.
15% of income tax if total income exceeds Rs. 1 crore but falls short of Rs. 2 crore.
If total income exceeds Rs. 2 crore but falls short of Rs. 5 crore, 25% of income tax would be due.
If total income surpasses Rs. 5 crore, 37% of income tax is due.
It's important to remember that the maximum surcharge rate of 37% was lowered to 25% in Budget 2023 as part of the new tax system, taking effect from April 1, 2023.
Taxable Income | Surcharge Rate Before the Budget 2023 | Surcharge Rate After the Budget 2023 |
Less than Rs. 50 lakhs | 0% | 0% |
Rs. 50 lakhs to Rs. Crore | 10% | 10% |
Rs. 1 Crore to Rs. 2 Crore | 15% | 15% |
Rs. 2 Crore to Rs. 5 Crore | 25% | 25% |
More than Rs. 5 Crore | 37% | 25% |
Filing of Income Tax Returns
Before understanding the tax filing process, you must learn about different income tax concepts. These include:
Tax Deducted at Source (TDS): When paying the recipient of income, tax is withheld at the source for designated payments. The income receiver may adjust the TDS amount with the final tax liability to claim credit for it.
Advance Tax: When a taxpayer's projected year income tax due surpasses Rs 10,000, they are required to make advance tax payments. The dates on which advance tax installments must be paid have been set by the government. To find out more about the advance tax liability and deadlines, click this link.
Self-Assessment Tax: The tax that the taxpayer must pay on the assessed income is the remaining balance. After deducting the advance tax and TDS from the total income tax computed on the assessed income, the self-assessment tax is determined.
Online Tax Payment: Through the e-filing website, taxpayers can pay both advance tax and self-assessment tax online. To find out how to use the e-filing system to pay taxes electronically, click this link.
Every year, the taxpayer is required to file an income tax return using the ITR forms that the income tax administration has prescribed. The taxpayer can file his income tax return using one of the seven ITR forms that the government has prescribed. The taxpayer is required to file his income tax return and select the relevant ITR forms.
ITR-1: Resident individuals with a salary, one residential property, other sources of income, less than Rs 5,000 from agriculture, and a maximum income of Rs 50 lakh overall.
ITR-2: Individuals/HUFs who do not work for a living or have multiple properties under proprietorship.
ITR-3: Individuals/HUFs who earn money via their own businesses or occupations, or from being a partner in a company.
ITR-4: Individuals/HUFs with one residential property and presumed income from a business or profession.
ITR-5: LLPs or partnership firms.
ITR-6: Companies.
ITR-7: Trusts.
Income Tax Calculations
Depending on the type of income they get, individuals should compute their income tax. The paid person is entitled to the available exemptions for different types of benefits. Sections 80C to 80U allow individuals and HUF to deduct certain expenses from their gross total income, which is then used to determine their income tax due. Additionally, the taxes paid, including advance tax and TDS, should be deducted from the overall income tax liability. The net amount of income tax payable should also be determined by applying the effects of the rebate under Section 87A and the relief under Sections 89, 90, and 91.
Your income tax return should include all of your received income. Naturally, there are exemptions from the statute for specific types of income, such as agricultural income and LTCG on listed equity shares up to Rs 1 lakh every financial year. Thus, the following is a brief formula that you can probably use to determine the amount of taxes owed on your income:
Put all of your income on a list, regardless of where it comes from.
Subtract any income that is legally exempt.
Make sure to claim all the deductions that are allowed for each source of income. For instance, deduct normal deductions of Rs 50,000 from salary income, municipal taxes from rental revenue, deduct company expenses from turnover, and so forth.
Take off any appropriate deductions from your total income, such as the 80C, 80D, 80TTA, 80TTB, and any Section 80 deductions.
This will bring you to your taxable income. Determine your applicable tax slab and the amount of income tax you must pay.
After this calculation, the taxpayer will use the IT department's e-filing portal to electronically file their income tax return. The taxpayer must register at www.incometax.gov.in to file the income tax return. Subsequently, the taxpayer can use the website and submit his ITR. Furthermore, the income tax department does not require a physical acknowledgement of the return to be sent. The income tax department now provides many methods for e-verification of the ITR, completing the process of filing an income tax return.
Key Income Tax Dates for 2023-24
March 15, 2024: The deadline for the fourth advance tax installment for the fiscal year 2023–2024.
June 15, 2024: The first advance tax installment is due for the fiscal year 2024–2025.
July 31, 2024: Individuals and entities that are not subject to tax audits and have not engaged in any specified domestic or foreign transactions must file their income tax returns for the fiscal year 2023–2024.
September 15, 2024: The second installment of advance tax for the fiscal year 2024–2025 is due.
September 30, 2024: The Income Tax Act requires taxpayers who are subject to audits to submit an audit report (Section 44AB) for the fiscal year 2024–2025.
October 31, 2024: ITR filing deadline for taxpayers subject to audit (i.e., those without defined domestic or foreign transactions).
October 31, 2024: Due date for AY 2024–2025 audit report for taxpayers with transfer pricing and specific domestic transactions.
November 30, 2024: Transfer price reports are required for firms to file their ITRs (for international or defined domestic transactions only).
December 15, 2024: The third installment of advance tax for the fiscal year 2024–2025 is due.
December 31, 2024: The deadline for filing an amended or belated return for the fiscal year 2023–2024.
Conclusion
India has a progressive income tax system, which means that as income levels rise, so do tax rates. The Indian income tax slab varies depending on the taxpayer's age, type, and residential status; it also specifies the appropriate rates for various income groups. The new tax regime and the previous tax regime are the two that exist. Every financial year, the applicable income tax rates and slabs may vary depending on what the government announces. For salaried individuals, the income tax slab for AY 2024–2025 will follow the announcements made in the budget for 2023. To learn about any latest tax modifications, it's always a good idea to consult a tax specialist and the official tax guidelines.
FAQ
Q1. When it is mandatory to file a return of income?
It is mandatory for companies and firms to submit an income tax return (ITR). Individuals, HUFs, AOPs, and BOIs, on the other hand, must file an ITR if their income is over the Rs 2.5 lakh basic exemption level. Senior citizens (up to Rs. 3 lakh) and super senior citizens (up to Rs. 5 lakh) are exempt from this cap.
Q2. What are the deductions allowed under the new tax regime?
Most of the deductions are prohibited under the new tax law. On the other hand, family pensions, standard deductions up to Rs. 50,000, and employer contributions to NPS accounts are all permitted.
Q3. Is the NPS scheme taxable under the new tax regime?
There is a tax benefit for the employer's portion of the NPS contribution. Employees do, however, contribute to the NPS.
Q4. Can I file a return of income even if it is below taxable limits?
Yes, even if your income is below the basic exemption amount, you are still able to voluntarily file an income return.
Q5. What are the implications of the new tax updates on investments?
The 2024-25 tax updates have introduced changes in the treatment of various investment instruments, affecting deductions, capital gains, and tax benefits associated with them.
Q6. Has there been any change in the taxation of cryptocurrencies in 2024-25?
The latest updates have clarified the taxation rules for cryptocurrencies, including applicable tax rates and reporting requirements to ensure compliance with the evolving digital asset market.
Q7. How will the new tax laws impact salaried employees?
The updates for 2024-25 include changes to the standard deduction, HRA, and other allowances for salaried employees, aimed at providing more relief and encouraging higher savings.
Q8. What are the new measures for preventing tax evasion in 2024-25?
The government has introduced enhanced measures for preventing tax evasion, including more stringent scrutiny of transactions, increased penalties for non-compliance, and improved data integration for monitoring purposes.
Q9. What documents should be enclosed along with the income tax return?
The income return does not require any documentation to be enclosed. But one should have the documents on hand in case they are needed later to provide them to any appropriate authorities.
Q10. Can I take a Section 87A rebate from tax on capital gains if I have no other income?
Under Section 87A, both short-term and long-term capital gains are refundable. You are unable to modify the Section 87A tax rebate from long-term capital gains (LTCG) if you have sold equity shares or equity-oriented funds (Section 112A).
Q11. What are the changes in income tax in the interim budget 2024?
There have been no adjustments made to the income tax for the academic year 2024–2025.
Q12. Can I file a return after the completion of the assessment year?
The Budget 2022 suggested adding an "Updated" return that, upon payment of additional tax, may be filed within 24 months of the conclusion of the applicable AY. You may file the "updated" return even if you did not file the original before the Income Tax Act's deadline.
Q13. What is the basic tax exemption limit for the financial year 2023-24?
According to the previous tax system, the basic exemption threshold was Rs. 2.5 lakhs for individuals under 60, Rs. 3 lakhs for those between 60 and 80, and Rs. 5 lakhs for those over 80. The basic exemption level under the new tax regime is Rs. 3 lakh for each individual.
Q14. Is the Income Tax Return filing due date extended?
No, July 31, 2024, is the deadline for filing income tax returns for FY 2023–2024 (AY 2024–25). However, you can file an amended or belated return by December 31, 2024, if you fail to file your taxes on time.
Q15. What are the major changes in income tax slabs for 2024-25?
The government has introduced new income tax slabs for the financial year 2024-25. These changes include revised income brackets and tax rates to provide relief to middle-income taxpayers.
Q16. Are there any new deductions or exemptions introduced in 2024-25?
Yes, the budget for 2024-25 has introduced several new deductions and exemptions aimed at encouraging savings and investments, including higher limits for certain sections under the Income Tax Act.
Q17. How have the tax rates changed for senior citizens in 2024-25?
For the financial year 2024-25, there are specific adjustments in tax rates and exemptions for senior citizens, providing them with additional benefits and higher exemption limits.
Q18. What are the new compliance requirements for 2024-25?
The new updates include stricter compliance requirements for high-value transactions and more detailed reporting for certain types of income to ensure better tax transparency and enforcement.
Q19. How do the 2024-25 updates impact tax filing deadlines?
The government has revised the tax filing deadlines for certain categories of taxpayers, providing extensions in specific cases and introducing penalties for late filing to streamline the tax filing process.
Q20. Are there any changes to corporate tax rates in 2024-25?
Yes, the corporate tax rates have been adjusted to promote business growth and investment, with incentives for startups and small businesses included in the 2024-25 tax updates.
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