A Comprehensive Guide to Income Tax Changes Effective October 1, 2024

Overview

The Indian income tax rules saw numerous noteworthy modifications with the introduction of the Union Budget 2024. These modifications are intended to boost tax collection, streamline the tax code, and encourage economic expansion. A large number of these changes will take effect on October 1, 2024.

We shall examine the main income tax regulations that take effect on October 1, 2024, in this blog article.

Important Changes to Income Tax

1. A Higher Securities Transaction Tax (STT)

The STT rates for securities' futures and options (F&O) will rise from 0.015% and 0.05% to 0.02% and 0.1%, correspondingly. The purpose of this adjustment is to guarantee that the tax burden accurately represents the transaction values and to match the STT rates with the expanding market activity.

2. TDS on State and Federal Government Bonds

Certain central and state government bonds, including bonds with variable rates, will be subject to a TDS of 10%. This clause will be applicable to transactions worth more than ₹10,000 as of October 1, 2024.

3. Vivad Se Vishwas Direct Tax Scheme 2024

The Direct Tax Vivad Se Vishwas Scheme, 2024 has been announced by the government and will go into effect on October 1. Through this program, taxpayers can resolve tax issues with the government for a discounted fee.

4. A Higher TDS Charge for Specific Transactions

With effect from October 1, the TDS rate on specific transactions—like payments made to non-residents for services—will rise from 10% to 20%.

5. Taxing Repurchases

As of October 1, buybacks will be treated as dividends and subject to taxation in the recipient's hands.

6. Modifications to Capital Gains Tax

With effect from October 1, the short-term capital gains tax rate on certain financial assets will rise from 15% to 20%.

With effect from October 1, the long-term capital gains tax rate on certain financial assets will rise from 10% to 12.5%. After July 23, 2024, indexation benefits will no longer be granted for the sale of long-term capital assets.

7. Modifications to Tax Deductions

• The head salary standard deduction cap has been raised from ₹50,000 to ₹75,000 in value.
• The family pension deduction cap has been raised from ₹15,000 to ₹25,000.
• Employer contributions under Section 80CCD(2) are now deducted at a rate of 14% rather than 10% of salary and dearness allowance.

8. Additional Modifications

The Income Tax Act of 1961 and the Finance Act of 2024 are two of the other income tax legislation that the government has proposed for revision.

Effect on Taxpayers

Various taxpayers will be affected by these developments in various ways. While some people would profit from the expanded tax credits and deductions, others might have to pay more in taxes as a result of the higher rates. It is imperative that taxpayers thoroughly evaluate how these changes may affect their unique financial circumstances.

In Summary

The Indian tax system would be significantly impacted by the income tax reforms included in Budget 2024. It is imperative that taxpayers be informed about these developments and take the required actions to abide by the new guidelines. Seeking advice from a tax expert may be very helpful in comprehending and negotiating the intricacies of the new tax system.

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