2024 Tax Rewind: Top Income Tax-Related Changes You Should Know About

As 2024 winds down, it’s worth taking a moment to reflect on the income tax changes that shaped the financial year. The Union Budget 2024-25 introduced a range of updates designed to simplify taxes, give taxpayers a little more breathing room, and align policies with India’s growing economic aspirations.

Here’s a look at what changed this year and how it might affect you.

1) New Tax Regime with Revised Slabs

One of the most talked-about changes this year was the revision of tax slabs under the new tax regime. The goal was to provide relief to salaried employees and pensioners while encouraging people to switch to the new system. Here’s what the new slabs look like:

Rs 0-3 lakh : Nil

Rs 3-7 lakh : 5 per cent

Rs 7-10 lakh : 10 per cent

Rs 10-12 lakh : 15 per cent

Rs 12-15 lakh : 20 per cent

Rs 15 lakh and above : 30 per cent

It is being said that salaried employees will save up to Rs 17,500 in income tax in the new tax regime after these changes.

2) Changes in Standard Deductions

The Budget also rolled out some changes to the income tax regime for the direct benefit of salaried employees and pensioners. The government has now raised the standard deduction limit from Rs 50,000 to Rs 75,000.

Similarly, the deduction on family pension for pensioners was enhanced from Rs 15,000 to Rs 25,000. However, it is important to note that only those who choose the new tax regime are eligible for this increased standard deduction.

3) Changes in Capital Gains Taxation

This year was also a turning point for many changes in the capital gains taxation pertaining to both Long-term Capital Gains (LTCG) and Short-term Capital Gains (STCG). Here’s what changed for you;

STCG Reforms: Short-term capital gains on specified financial assets, such as listed on listed equity shares, business trusts, and equity-oriented mutual funds, are now taxed at a rate of 20 per cent instead of the previous rate of 15 per cent.

All other financial assets and non-financial assets will continue to be taxed at their applicable tax rates, maintaining consistency in the broader tax framework.

LTCG Reforms: Long-term gains on all financial and non-financial assets now attract a tax rate of 12.5 per cent without indexation. Previously, this rate was 20 per cent with indexation.

Exemption Limit: To benefit the lower and middle-income classes, the government has also increased the limit of exemption of capital gains on certain financial assets from Rs 1 lakh to Rs 1.25 lakh per year has been proposed. This increased exemption limit is applicable for FY 2024-25 and subsequent years.

4) Indexation Benefit Changes on Immovable Property

For properties purchased on or after July 23, 2024, the indexation benefit has been removed. Taxpayers now have been given two options when calculating capital gains:

- Pay 20 per cent tax with indexation.

- Opt for a flat 12.5 per cent tax without indexation.

This dual system seeks to balance ease of compliance with revenue generation.

5) TDS and TCS Rules Got an Update

Adjustments were made to TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) rules, aimed at making processes smoother and reducing compliance burdens. This is what has changed;

- Salaried individuals can now offset TCS paid and TDS deducted on other income sources against their salary TDS. This rule, which came into effect on October 1, 2024, promises faster access to funds for taxpayers without waiting for refunds.

TDS on Property Sales: Homebuyers must deduct 1 per cent TDS on the sale value or stamp duty value of the property (whichever is higher) when purchasing immovable properties above Rs 50 lakh. The amendment now clarifies that for properties involving multiple buyers or sellers, the Rs 50 lakh threshold applies to the total combined transaction value. The rule has been effective from October 1, 2024.

Lower TDS Rates: The government has revised the TDS rate to further simplify the process in the following ways;

- The 5 per cent TDS rate applicable to various payments has been reduced to 2 per cent

- The 20 per cent TDS on the repurchase of mutual funds or UTI units has been eliminated

- The TDS rate levied on e-commerce operators has also been reduced from 1 per cent to 0.1 per cent

- TDS on insurance commissions and life insurance policy payouts has dropped from 5 per cent to 2 per cent w.e.f. From 1 October 2024. It is believed that this reduction will increase the net payouts for policyholders, improving their cash flow

Simpler Rules for Minors’ Income: Starting January 1, 2025, families can adjust TCS credits collected in a minor’s name against the parent’s tax liability if the minor’s income is clubbed with the parent’s. Previously, TCS credits collected in a minor’s name could only be claimed under the minor’s tax liability.

However, no clarity has been provided for cases where the minor has no income.

6) Focus on Reducing Litigation

In order to reiterate its commitment to minimise litigation and appeals on taxpayers, the government introduced the Vivad se Vishwas Scheme, 2024 in the Budget as a mechanism to resolve pending income tax disputes.

The monetary thresholds for filing appeals related to direct taxes, excise, and the service tax have been increased to Rs 60 lakh, Rs 2 crore, and Rs 5 crore respectively for Tax Tribunals, High Courts, and the Supreme Court.

As we inch closer to moving into 2025, these changes are set to shape how many taxpayers approach their finances. Take note of these changes to once again familiarise yourself with these updates and factor them into your financial planning.