The Finance (No. 2) Bill, 2024 aims to amend the Income-tax Act, of 1961, continuing reforms in the direct tax system through tax reliefs, simplifying provisions, and addressing taxpayer challenges. The Bill also proposes changes to the Black Money (Undisclosed Foreign Income and Assets) Act, Securities Transaction Tax (STT), Equalisation Levy, and the Prohibition of Benami Property Transaction Act.
The amendments are categorized as follows:
- Rates of income-tax
- Measures to promote investment and employment
- Simplification and rationalisation
- Widening and deepening of the tax base and anti-avoidance
- Tax administration
These changes are crucial for both businesses and individual taxpayers to stay compliant and make informed financial decisions.
1. Income-Tax Rates for 2024-25: Tax rates for various categories remain unchanged. Rates for individuals, HUFs, AOPs, and companies as specified in sections 115BAA, 115BAB, 115BAC, 115BAD, and 115BAE will continue as before, ensuring consistency for taxpayers.
2. TDS Rates for FY 2024-25: TDS rates for non-salary incomes, such as interest and dividends, remain largely unchanged. Notably, TDS on capital gains for non-domestic companies is reduced from 40% to 35%, and specific adjustments are made for non-residents’ long-term and short-term capital gains.
3. TDS from Salaries for FY 2024-25: TDS rates on salaries and advance tax computations for FY 2024-25 are specified. These also apply to accelerated assessments, like provisional shipping profits and assessments for individuals permanently leaving India.
4. Increase in Standard Deduction: To promote the new tax regime, the standard deduction under section 16 increases to Rs. 75,000. The deduction for family pension under section 57 rises to Rs. 25,000, effective April 1, 2025.
5. Employer Pension Contribution Deduction: The deduction for non-government employer contributions to pension schemes under section 80CCD increases from 10% to 14% of the employee’s salary, effective April 1, 2025, matching the contribution limits for government employees.
6. Tax Incentives to IFSC: The IFSC continues to receive tax concessions, including exemptions for specified funds like retail and Exchange Traded Funds. Income from Core Settlement Guarantee Funds in IFSC is also exempted.
7. Amendment of Section 56: The provision taxing excess consideration for shares over their fair market value under section 56(2)(viii) is removed from the assessment year 2025-26, reducing compliance burdens on non-public companies.
8. Promotion of Cruise Operations: A presumptive taxation regime for non-residents operating cruise ships is introduced, deeming 20% of passenger carriage receipts as taxable profits. Lease rentals paid by these companies are exempt in the hands of recipient foreign companies.
9. Block Assessment Provisions: The block assessment scheme is reintroduced for cases involving searches and requisitions, including the previous six assessment years and up to the date of the last authorization, streamlining the process.
10. Assessment and Reassessment Procedures: Time limits for issuing notices are reduced to three years for regular cases and up to five years for substantial income escape cases, simplifying compliance and reducing litigation.
11. Period of Limitation for Penalties: The limitation period for imposing penalties under section 275 is rationalized by removing references to the date of receipt of the order by the Principal Chief Commissioner or Chief Commissioner.
12. Set Off and Withholding of Refunds: Section 245 is amended to allow withholding refunds up to sixty days from assessment completion, effective from October 1, 2024, preventing revenue loss.
13. Filing Appeals to ITAT: The time limit for filing appeals to the ITAT is extended to two months from the end of the month in which the order is communicated, effective October 1, 2024, improving appeal tracking.
14. The merger of Trusts: Trusts transitioning from the first regime under section 10(23C) to the second regime under sections 11 to 13 will benefit until their current approval’s validity and can subsequently apply under the second regime from October 1, 2024.
15. Condonation for Trusts’ Registration: The Principal Commissioner or Commissioner can condone delays in filing registration applications under section 12AB if there is a reasonable cause, effective from October 1, 2024.
16. Approval Timelines for Funds: Timelines for filing applications seeking approval under section 80G are rationalized to prevent unintended exits from the approval regime, effective October 1, 2024.
17. Disposing Applications for Trusts: Six-month period for disposing of applications seeking registration under section 12AB or approval under section 80G, effective from October 1, 2024.
18. Merger of Exempt Trusts: Clarifies that mergers of trusts under the exemption regime will not attract tax on accreted income under Chapter XII-EB, effective from April 1, 2025.
19. Exemptions for Trusts: Includes references to clauses (23EA), (23ED), and (46B) in section 11(7), allowing trusts to claim exemptions under these clauses from April 1, 2025.
20. Simplified Capital Gains Taxation: Introduces two holding periods: 12 months for listed securities and 24 months for other assets. The short-term capital gains tax rate on STT-paid equity shares is increased to 20%, and the long-term capital gains tax rate for all assets is set at 12.5%, effective April 1, 2025.
21. Specified Mutual Fund Definition: Clarifies investment proportions for specified mutual funds under section 50AA, ensuring clear tax treatment for funds like ETFs and Gold Mutual Funds.
22. Rationalized TDS Rates: Reduces TDS rates for insurance commissions, life insurance policy payments, lottery ticket sales commissions, brokerage payments, and certain rents from 5% to 2%. Also reduces TDS by e-commerce operators from 1% to 0.1%, effective in 2024 and 2025.
23. TCS Credit for Salaried Employees: Section 192 is amended to allow TCS and TDS credit from other income heads to be considered for a salary tax deduction, effective October 1, 2024.
24. Interest Rates for Late TCS Payment: The interest rate for late TCS payments increased from 1% to 1.5% per month, aligning with late TDS payment rates, effective April 1, 2025.
25. Remuneration Deduction for Partners: Increases the deduction limit for remuneration to working partners from Rs. 1.5 lakh to Rs. 3 lakh for the first Rs. 6 lakh of book profit or in case of a loss, effective April 1, 2025.
26. TCS Credit for Minors: Allows parents to claim TCS credit collected in the name of minors under Section 206C from October 1, 2024.
27. Tax on Share Buy-Back: Aligns tax treatment of buy-back transactions with the broader framework for capital gains and dividends, ensuring consistent tax liabilities.
28. Revised Securities Transaction Tax: Updates STT rates to align with market practices, effective from specified dates in the legislative amendments.
29. Income from House Property: Clarifies reporting requirements for income from letting out house property, ensuring accurate and timely tax reporting from April 1, 2025.
30. Amendment of Section 47: Excludes certain transactions, like gifts and transfers to irrevocable trusts, from the definition of ‘transfer’ for capital gains tax purposes, effective April 1, 2025.
31. TDS on Payments to Partners: Introduces TDS on payments exceeding Rs. 20,000 to partners by partnership firms, effective April 1, 2025.
32. TCS on Luxury Goods: Extends TCS to luxury goods exceeding Rs. 10 lakh from January 1, 2025.
33. TDS on Immovable Property Sales: Clarifies that the TDS threshold applies to aggregate consideration for all transferors, effective October 1, 2024.
34. TDS on Savings Bonds: Applies TDS to interest payments on Floating Rate Savings Bonds exceeding Rs. 10,000, effective October 1, 2024.
35. Life Insurance Expense Deductions: Prevents misuse of non-business expense claims by life insurance companies from April 1, 2025.
36. Foreign Tax Credits: Includes taxes withheld outside India in total income calculations from April 1, 2025.
37. Excluding Certain Payments from Section 194C: Excludes payments under Section 194J from Section 194C’s definition of “work” from October 1, 2024.
38. Disallowance of Settlement Expenses: Specifies that settlement expenses for legal contraventions are not allowable as business expenses from April 1, 2025.
39. Amendment of Section 55: Redefines “cost of acquisition” and “cost of improvement” for specific scenarios, effective April 1, 2025.
40. Vivad se Vishwas Scheme 2024: Offers taxpayers an opportunity to settle pending tax disputes by paying a specified percentage of the disputed tax.
41. Equalisation Levy: A 2% levy on non-resident e-commerce operators’ consideration will not apply to income received after August 1, 2024. Applies to income from April 1, 2020, to August 1, 2024.
42. Black Money Act Amendments: Increases penalty threshold for undisclosed foreign income and assets from Rs. 5 lakh to Rs. 20 lakh, effective October 1, 2024.
43. Section 276B Amendments: Exempts prosecution if TDS for a quarter is deposited before the TDS return filing due date, effective October 1, 2024.
44. Time Limitation for Default Orders: Reduces time limit for orders deeming a person in default to six years from the financial year end, effective April 1, 2025.
45. Section 200A Scope: Expands processing to include statements filed by non-deductors, like Form 26QF by exchanges, from April 1, 2025.
46. Lower Deduction Certificates: Includes provisions for obtaining lower deduction certificates for transactions under sections 194Q and 206C(1H), effective October 1, 2024.
47. TCS Exemptions: Empowers the Central Government to exempt certain persons or classes from TCS provisions, effective October 1, 2024.
48. Correction Statement Time Limit: Sets a six-year limit for submitting TDS/TCS correction statements from the financial year end, effective April 1, 2025.
49. Penalty for Late Statements: No penalty for late TDS/TCS statements if filed within one month and tax with interest is paid, effective April 1, 2025.
50. Statements by Liaison Offices: Requires non-residents’ liaison offices to submit annual activity statements, with penalties for delays, enhancing regulatory compliance.
51. Arms Length Price for Domestic Transactions: Allows Transfer Pricing Officer to determine Arm’s Length Price for specified domestic transactions not initially referred to or reported, from April 1, 2025.
52. Aadhaar Enrolment ID Discontinuation: Disallows using Aadhaar Enrolment ID instead of Aadhaar number for PAN applications and returns from October 1, 2024.
53. Advance Rulings Amendments: Allows withdrawal of applications transferred to the Board for Advance Rulings by October 31, 2024, if no order under section 245R(2) is passed.
54. Commissioner (Appeals) Powers: Empowers the Commissioner (Appeals) to set aside best judgment assessment orders and refer cases back to the Assessing Officer from October 1, 2024.
55. Section 271FAA Amendment: Imposes penalties for inaccurate financial transaction statements and due diligence failures, aligning with the AEOI framework from October 1, 2024.
56. Black Money Act Reference: Includes Black Money Act liabilities for obtaining tax clearance certificates before leaving India, effective October 1, 2024.
57. Assessment Time-Limits: Streamlines assessment procedures by reducing initiation time limits and aligning various assessment procedures, effective September 1, 2024.
58. Section 80G Amendment: Streamlines approval processes for deductions for charitable donations, enhancing efficiency from April 1, 2025.
59. Removing NHB Reference: Removes National Housing Bank reference in section 43D, aligning with the RBI’s current regulatory framework from April 1, 2025.
60. Adjusting Liabilities Under Black Money Act: Allows liabilities under the Black Money Act to be adjusted against seized assets during search operations from April 1, 2025.
61. Benami Property Act Amendments: Enhances enforcement mechanisms for prosecuting Benami property transactions, effective from April 1, 2025.
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