The Union Budget 2024-25 introduced several changes to the new tax regime to encourage its adoption and provide relief to taxpayers. Below are the key changes announced:

1. Income Tax Slabs (New Tax Regime)

The new tax regime offers the following revised tax slabs:

2. Tax Rebate under Section 87A

• Taxpayers with an annual income of up to Rs 7 lakh are eligible for a rebate of up to Rs 25,000 under Section 87A. This effectively makes their taxable income NIL.

3. Higher Standard Deduction for Salaried and Pensioners

• A standard deduction of Rs 75,000 is now available under the new tax regime for salaried individuals. This deduction was previously available only under the old tax regime

4. Default Tax Regime

• The new tax regime is now the default regime for taxpayers.
• Taxpayers can still opt for the old tax regime if they prefer it.

5. Family Pension Deduction

• Deduction on family pensions has been increased:
  • From ₹15,000 to ₹25,000.

6. Incentives for Senior Citizens

• A higher exemption limit and deductions for senior citizens were retained under the new regime.

7. Focus on Simplification

• The government emphasized that the new tax regime is simpler and more beneficial for a wider section of taxpayers, encouraging a shift from the old regime.

8. New Taxation Rule on Holding Period:

Holding Period Classification:

• The 36-month holding period has been removed, leaving only two categories:
• 12 months for listed securities (any listed security held for more than 12 months is Long-Term).
• 24 months for all other assets. 
• Unlisted bonds and debentures will now be taxed like debt mutual funds and market-linked debentures, attracting tax at slab rates, making them short-term regardless of the holding period.

8. LTCG on Equity:

• • The exemption limit for LTCG on the transfer of equity shares, equity-oriented funds, and business trust units has been increased from ₹1 lakh to ₹1.25 lakh per year.
  • However, the tax rate for these gains has increased from 10% to 12.5%.
  • For non-equity assets, the LTCG tax rate has reduced from 20% to 12.5%.
  • The indexation benefit for long-term assets has been removed. Any sale of long-term assets after 23rd July 2024 will be taxed at 12.5% without indexation.
  • Despite the changes, the benefit of Fair Market Value (FMV) as of 01.04.2001 remains available for calculating the cost when selling the asset. 

9. STCG on Equity:

• • For listed equity shares, equity-oriented funds, and business trust units, the tax on STCG has increased from 15% to 20%.
  • Other short-term assets will continue to be taxed at the applicable slab rates.

10. Proposed Changes in TDS Rates (Budget 2024)

The following TDS sections will see a reduction in rates or changes effective from October 2024 and April 2025:

11. Introduction of TDS on Payments Made to Partners by Firms (Section 194T)

Budget 2024 introduced a new provision for TDS on payments made by partnership firms and Limited Liability Partnerships (LLPs) to their partners. The payments could include salary, remuneration, interest, bonus, or commission.

Key Details:

• TDS Rate: 10%
• Threshold: Payments exceeding Rs. 20,000 made to partners will be subject to TDS under Section 194T.

Increase in Limit for Partner’s Remuneration (Section 40(b))

Under Section 40(b), the budget has increased the limit for partner’s remuneration as follows:

• For the first Rs. 6,00,000 of book profit: The limit is Rs. 3,00,000 or 90% of the book profit, whichever is higher.
• For the remaining balance of book profit: The limit is 60% of the book profit.

These provisions are aimed at ensuring that the tax treatment of partners’ remuneration is aligned with the business’s profitability and encourages the smooth functioning of partnerships and LLPs.

12. Abolishment of Angel Tax

Budget 2024 proposes the removal of Angel Tax under Section 56(2)(viib).

13. Corporate Taxes on Foreign Companies

In Budget 2024, Finance Minister Nirmala Sitharaman proposed a reduction in the corporate tax rate for foreign companies.

• Current Tax Rate: 40%
• Proposed Tax Rate: 35%

14. Increased Deduction on Employer’s Contribution to Pension Scheme

In Budget 2024, the deduction under Section 80CCD for the employer’s contribution to the pension scheme has been increased.

• Previous Deduction Limit: 10% of the employee’s salary
• New Deduction Limit: 14% of the employee’s salary during the previous year

This change aims to encourage employees’ retirement savings by allowing a higher deduction for the employer’s contribution to the pension scheme.

15. Increase in STT on Futures and Options

In Budget 2024, the Securities Transaction Tax (STT) has been revised for futures and options:

• STT on Futures: Increased from 0.0125% to 0.02%
• STT on Options: Increased from 0.0625% to 0.1%

This change will impact traders in the futures and options markets by raising the tax on transactions.

16. Other Direct Tax Updates

1. Reopening of Income Tax Returns (ITR):
   • Income tax assessments can be reopened beyond three years only if the escaped income is Rs. 50 lakh or more. The reopening can occur up to five years from the end of the assessment year.
   • For search cases, the reopening time limit has been reduced from 10 years to 6 years.
2. Income Tax Appeals:
   • The monetary limits for filing tax appeals in various courts have been increased:
     • Tax Tribunals: Rs. 60 Lakh
     • High Courts: Rs. 1 Crore
     • Supreme Court: Rs. 2 Crore
3. Vivaad Se Vishwas Scheme:
   • The Vivaad Se Vishwas Scheme has been reintroduced to facilitate the settlement of income tax disputes, aiming to reduce litigation and simplify the dispute resolution process.