Top Income Tax updates in 2024 that may impact your ITR filing in 2025
The income tax changes announced in July 2024 may mainly impact the tax deductions and exemptions you can claim when filing your ITR in July 2025.
In 2024, the government introduced changes to income tax laws in the middle of the year. This happened because the Union Budget 2024 was presented in July, after the general elections held from April to June. Since the Budget came mid-year, many people might not remember the tax changes announced. Most of these changes apply to the current financial year 2024-25 and will affect the tax deductions and exemptions you can claim when filing your ITR in July 2025.
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Revised income tax slabs under the new tax regime
The new tax regime has introduced revised income tax slabs that are designed to benefit individual taxpayers. Under the updated structure, income up to Rs 3,00,000 is exempt from tax, while earnings between Rs 3,00,001 and Rs 7,00,000 are taxed at 5%. Income from Rs 7,00,001 to Rs 10,00,000 is taxed at 10%, and the next bracket, Rs 10,00,001 to Rs 12,00,000, is taxed at 15%. For earnings between Rs 12,00,001 and Rs 15,00,000, the tax rate is 20%, and any income above Rs 15,00,000 is taxed at 30%. These changes in income tax slabs under the new regime will offer taxpayers the opportunity to save up to Rs 17,500 annually.
Increased standard deduction
Under the new tax system, the standard deduction has been increased to Rs 75,000 for salaried individuals, compared to Rs 50,000 earlier. For family pensioners, the deduction has gone up to Rs 25,000 from Rs 15,000. However, in the old tax system, the deductions remain unchanged at Rs 50,000 for salaried individuals and Rs 15,000 for family pensioners. These higher deductions in the new regime help reduce taxable income, making it a more appealing option for a wider range of taxpayers.
Higher deduction on employer’s contribution to NPS
Under the new tax system, employees can now claim deductions of up to 14% of their basic salary for employer contributions to the National Pension System (NPS), an increase from the earlier 10%. However, if the total contributions to EPF, NPS, and superannuation funds go over Rs 7.5 lakh in a year, the excess amount will still be taxed. This ensures the benefits stay balanced within set limits.
New tax rates for long-term capital gains (LTCG) and short-term capital gains (STCG)
The tax on short-term capital gains (STCG) from equity investments has gone up from 15% to 20%. For other types of investments, STCG will be taxed based on the individual’s regular income tax slab. Meanwhile, long-term capital gains (LTCG) will now have a fixed tax rate of 12.5%. Long-term capital gains (LTCG) from equity and equity mutual funds will now be tax-free for amounts up to Rs 1.25 lakh in a financial year, up from the earlier limit of Rs 1 lakh.
Changes in holding period for capital gains taxation
To decide if an asset is long-term or short-term, there will now only be two holding periods: 12 months and 24 months. The previous 36-month period is no longer applicable. Also, for all listed securities, the holding period is now 12 months.
Rationalised TDS rates
To make things simpler, TDS rates have been adjusted for different payments. For example, insurance commissions will have a 2% TDS, rent will have a 2% TDS, and e-commerce payments will have a 0.1% TDS. This change means less tax will be deducted at the start, allowing taxpayers to keep more money upfront.
Claiming TDS and TCS credit against salary
Salaried individuals can now adjust TDS (tax deducted at source) or TCS (tax collected at source) deductions from other sources of income against TDS on their salary, easing cash flow concerns and ensuring higher monthly take-home pay.
Changes in TDS in on-property sales
For property sales exceeding Rs 50 lakh, TDS (tax deducted at source) is now applicable on the entire sale value, irrespective of individual sellers’ shares, enhancing compliance and preventing TDS evasion.
Introduction of Vivad se Vishwas scheme 2.0
The government has reintroduced a direct tax vivad se vishwas scheme to resolve legal disputes between taxpayers and the income tax department.
Aadhar mandatory for ITR and PAN applications
Starting October 1, 2024, individuals will no longer be able to use their Aadhaar enrolment numbers for filing ITR or applying for PAN. Aadhaar itself will be mandatory for these processes.
Revised time limits to open old ITRs
The time limit for reopening old ITRs has been reduced to five years for cases involving income escaping assessments above Rs 50 lakh.