1. RATES OF INCOME TAX- FOR INDIVIDUAL/HUF
Tax rates under section 115BAC (New Tax Regime) has been structured as follows –
| TOTAL INCOME | NEW SCHEME RATE (SEC 115BAC) |
| Upto 3,00,000 | Nil |
| From 3,00,000 to 7,00,000 | 5% |
| From 7,00,001 to 10,00,000 | 10% |
| From 10,00,001 to 12,00,000 | 15% |
| From 12,00,001 to 15,00,000 | 20 % |
| Above 15,00,000 | 30% |
2. Buy Back of Shares- Treated as Deemed Dividend in the hands of shareholders
Effective Date of Amendment- From 01st October 2024
Insertion of Section 2(22)(f) :
“any payment by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 68 of the Companies Act, 2013”
Amendment of Section- 46A:
“Provided that where the shareholder receives any consideration of the nature referred to in sub-clause (f) of clause (22) of section 2 from any company, in respect of any buy-back of shares, that takes place on or after the 1st day of October, 2024, then for the purposes of this section, the value of consideration received by the shareholder shall be deemed to be nil.”
Analysis:
- The sum paid by a domestic company for purchase of its own shares shall be treated as dividend in the hands of shareholders,
- Such deemed dividend shall be charged to income-tax at applicable rates.
- No deduction for expenses shall be available against such dividend income.
- Cost of acquisition of the shares which have been bought back would generate a capital loss in the hands of the shareholder.
- This Capital loss can be carry forwarded and can be set off against Capital gain Income.
Example :
100 shares bought in 2020 | @Rs. 40/- per share |
Total cost of acquisition | Rs. 4000/- |
20 shares bought back in 2024 | @Rs. 60/- per share |
Income taxable as deemed dividend | Rs. 1200/- |
Capital loss on such buyback (Rs. 40 *20) | Rs. 800/- |
50 Shares sold in 2025 | @Rs. 70 per share |
Capital Gain (3500 – 2000) | Rs. 1500 |
Chargeable capital gain after set off | Rs. 700 |
3. Increase in Standard Deduction limit in New tax regime
Effective Date of Amendment- 1st April, 2025 (Applicable for AY 2025-26)
Amendment of Section- 16 (ia):
Provided that in a case where income-tax is computed under clause (ii) of sub-section (1A) of section 115BAC, the provisions of this clause shall have effect as if for the words“fifty thousand rupees”, the words “seventy-five thousand rupees” had been substituted
Analysis:
- Standard deduction limit under new tax regime is increased from 50k to 75k
4. Employer’s Contribution to pension funds specified u/s 80CCD (NPS and Atal Pension Yojana)
Effective Date of Amendment- 1st April, 2025 (Applicable for AY 2025-26)
Amendment of Section- 36 (1) (iva):
“for the words “ten per cent.”, the words “fourteen per cent.” shall be substitutedAmendment of Section- 80CCD (2)
“Provided that where the total income of the assessee is chargeable to tax under sub-section (1A) of section 115BAC, the provisions of sub-section (2) shall have effect as if for the words “ten per cent.” referred to in clause (b), the words “fourteen per cent.” had been substituted
Analysis:
Deduction to Employer – Section 36(1)(iva)
- Employer contribution towards a pension scheme, as referred to in section 80CCD of the Act, on account of an employee shall be allowed as deduction from PGBP Income as does not exceed 14% of the employee’s salary in the previous year
Deduction to Employee – Section 80CCD(2)
- If an employee opts for the new tax regime, any employer contribution towards a pension scheme shall be allowed as a deduction to the employee under section 80CCD(2), not exceeding 14% of the employee’s salary.
5. Increase in the deductible limit of remuneration for working partners of a firm
Effective Date of Amendment– 1st April, 2025 (Applicable for AY 2025-26)
Amendment of Section- 40 (b):
- for the letters and figures “Rs. 3,00,000”, the letters and figures “Rs. 6,00,000” shall be substituted
- for the letters and figures “Rs. 1,50,000”, the letters and figures “Rs. 3,00,000” shall be substituted.
Analysis:
Amended limit of remuneration to working partners in a partnership firm is as follows:
a. | on the first Rs. 6,00,000 of the book profit or in case of a loss | Rs. 3,00,000 or at the rate of 90 per cent of the book profit, whichever is more; |
b. | on the balance of the book-profit | at the rate of 60 per cent |
6. Sunset the provision of clause 56(2)(viib)- Tax on Share Premium of Private Companies
Effective Date of Amendment- 1st April, 2025 (Applicable for AY 2025-26)
Amendment of Section- 56 (2)(viib):
After the 2nd Proviso, the following proviso shall be inserted
“Provided also that the provisions of this clause shall not apply on or after the 1st day of April 2025.”
Analysis:
Section 56(2) provides that where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares, if the consideration received for issue of shares exceeds the face value of such shares, the aggregate consideration received for such shares exceeding such fair market value shall be chargeable to income tax under the head “Income from other sources”.
IFOS in the hands of company = Consideration received – FMV of Shares
The provisions of this clause shall not apply from the assessment year 2025-26
7. Increase in Family Pension deduction limit
Effective Date of Amendment- 1st April, 2025 (Applicable for AY 2025-26)
Amendment of Section- 57 (iia):
‘Provided that in a case where income-tax is computed under clause (ii) of sub-section (1A) of section 115BAC, the provisions of this clause shall have effect as if for the words “fifteen thousand rupees”, the words “twenty-five thousand rupees” had been substituted;’.
Analysis:
In case of income in the nature of family pension deduction limit has been increased from Rs 15,000 to Rs 25,000 in case assesee has opted for new tax regime u/s 115BAC
Lower of the following shall be allowed as deduction:
- Sum equal to 33.33% of such income or
- Twenty five thousand rupees (previously 15,000)
8. Increase in short term capital gain tax rate from 15% to 20%
Effective Date of Amendment- 23rd July, 2024
Amendment of Section- 111A:
(a) for the long line occurring before the first proviso, the following shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:––
“the tax payable by the assessee on the total income shall be the aggregate of—
- the amount of income-tax calculated on such short-term capital gains–
(a) at the rate of fifteen per cent. for any transfer which takes place before the 23rd day of July, 2024;
and
(b) at the rate of twenty per cent. for any transfer which takes place on or after the 23rd day of July, 2024;
- the amount of income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee:”;
(b) in the first proviso, for the words “rate of fifteen percent.”, the words, brackets and figure “rate as applicable in clause (i)” shall be substituted and shall be deemed to have been substituted.
Analysis:
Rate for short-term capital gain under provisions of section 111A of the Act on STT paid equity shares, units of equity oriented mutual fund and unit of a business trust is proposed to be increased to 20% from the present rate of 15%.
9. Increase in long term capital gain tax rate from 10% to 12.5%
Effective Date of Amendment- 23rd July, 2024
Amendment of Section- 112A:
In section 112A of the Income-tax Act, in sub-section (2), for clause (i) the following shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:–“(i) the amount of income-tax calculated on such long-term capital gains exceeding one lakh twenty-five thousand rupees––
(a) on long-term capital gains at the rate of ten per cent. for any transfer which takes place before the 23rd day of July, 2024;
and
(b) on long-term capital gains, at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024:
Provided that the limit of one lakh twenty-five thousand rupees shall apply on aggregate of the long term capital gains under sub-clauses (a) and (b);”
Analysis:
- Exemption of gains upto Rs 1.25 lakh is proposed for long-term capital gains under section 112A on STT paid equity shares, units of equity-oriented fund and business trust,
- Effective from July 23, 2024, the Long Term Capital Gains Tax rate for the aforementioned asset class has been increased from 10% to 12.5%
10. Parity in taxation between resident and non-resident assesses- LTCG u/s 112A & 112, & STCG u/s 111A
Effective Date of Amendment- 23rd July, 2024
Amendment of Section- 115AB, 115AC, 115ACA, 115AD & 115E:
In section 115AB, 115AC, 115ACA, 115AD of the Income-tax Act, in sub-section (1), the following clause shall be substituted and shall be deemed to have been substituted with effect from the 23rd day of July, 2024, namely:–
“(ii) the amount of income-tax calculated on the income by way of long-term capital gains referred to in clause (c), if any, included in the total income, –(A) at the rate of ten per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) at the rate of twelve and one-half per cent. for any transfer which takes place on or after the 23rd day of July, 2024; and”
In section 115AD of the Income-tax Act, in sub-section (1) with effect from the 23rd day of July, 2024,––
(a) in the longline, in clause (ii), for the proviso, the following proviso shall be substituted and shall be deemed to have been substituted, namely:–
“Provided that the amount of income-tax calculated on the income by way of short-term capital gains referred to in section 111A shall be at the rate of–
(A) fifteen per cent. for any transfer which takes place before the 23rd day of July, 2024; and
(B) twenty per cent. for any transfer which takes place on or after the 23rd day of July, 2024;”
Analysis:
To bring parity of taxation between residents and non-residents, corresponding amendments to section 115AD, 115AB, 115AC, 115ACA and 115E are being made to align the rates of taxation in respect of long-term capital gains proposed under section 112A and 112 and rates of short term capital gains proposed under section 111A.
11. Change in Holding period for determining Long Term or Short-Term Capital Asset
Effective Date of Amendment- 23rd July, 2024
Amendment of Section- 2 (42A):
the words “thirty-six months”, the words “twenty-four months” shall be substituted and shall be deemed to have been substituted
Analysis:
It is proposed that there will only be two holding periods, 12 months and 24 months, for determining whether the capital gains is short-term capital gains or long term capital gains. For all listed securities, the holding period is proposed to be 12 months and for all other assets, it shall be 24 months.
SL NO. | ASSET CLASS | HOLDING PERIOD | CLASSIFICATION |
1. | Listed Securities | More than 12 months | Long Term |
2. | Units of Listed Business Trust (ReIT’s, InVITs) | More than 12 months | Long Term |
3 | Unlisted Shares | More than 24 months | Long Term |
4 | Unlisted Bonds & Debentures, Debt Mutual Funds | More than 24 months | Will be taxed at applicable slab rate- Irrespective of holding period |
5 | Land & Building | More than 24 months | Long Term |
6 | Other Non-Financial Assets | More than 24 months | Long Term |
12. Indexation Benefit Removed for the Calculation of Long Term Capital Gain
Effective Date of Amendment- 23rd July, 2024
Amendment of Section- 48:
In the second proviso, after the words “where long-term capital gain arises from the transfer”, the brackets, words, figures and letters “(which takes place before the 23rd day of July, 2024)” shall be inserted and shall be deemed to have been inserted with effect from the 23rd day of July, 2024.
Analysis:
- Indexation available under second proviso to section 48 is proposed to be removed for calculation of any long-term capital gains which was available for property, gold and other unlisted assets.
- Long-term capital gains tax rate for all categories of assets, under various sections of the Act, be set at 12.5%.
13. With Holding of Tax (TDS and TCS)
I. Rationalisation of TDS rates is proposed as below
|
Sl No. |
Section |
Previous TDS Rate |
Proposed TDS Rate |
With effect from |
|
1 |
Section 194D – Payment of insurance commission (in case of person other than company) |
5% |
2% |
1.4.2025 |
|
2 |
Section 194DA – Payment in respect of life insurance policy |
5% |
2% |
1.10.2024 |
|
3 |
Section 194G – Commission etc on sale of lottery tickets |
5% |
2% |
1.10.2024 |
|
4 |
Section 194H – Payment of commission or brokerage |
5% |
2% |
1.10.2024 |
|
5 |
Section 194-IB – Payment of rent by certain individuals or HUF |
5% |
2% |
1.10.2024 |
|
6 |
Section 194M – Payment of certain sums by certain individuals or Hindu undivided family |
5% |
2% |
1.10.2024 |
|
7 |
Section 194-O – Payment of certain sums by e-commerce operator to e-commerce participant |
1% |
0.1% |
1.10.2024 |
|
8 |
Section 194F relating to payments on account of repurchase of units by Mutual Fund or Unit Trust of India |
Proposed to be omitted |
1.10.2024 |
|
II. Ease in claiming credit for TCS collected/TDS deducted for salaried employees
Effective Date of Amendment- 1st October, 2024
Amendment of Section-192:
‘(2B) Where an assessee who receives any income chargeable under the head “Salaries” has, in addition,-(i) any income chargeable under any other head of income (not being a loss under any such head other than the loss under the head “Income from house property”);
or
(ii) any tax deducted or collected under the provisions of Part B or Part BB of this Chapter, as the case may be, for the same financial year, he may send to the person responsible for making the payment referred to in subsection (1), the particulars of—(a) such other income;
(b) any tax deducted or collected under any other provision of Part B or Part BB of this Chapter, as the case may be; and
(c) the loss, if any, under the head “Income from house property”,in such form and verified in such manner as may be prescribed, and thereupon the person responsible as aforesaid shall take into account the particulars referred to in clauses (a), (b) and (c) for the purposes of making the deduction under sub- section (1):
Provided that this sub-section shall not in any case have the effect of reducing the tax deductible except where the loss under the head “Income from house property” has been taken into account, from income under the head “Salaries” below the amount that would be so deductible if the other income and the tax deducted in accordance with other provisions of Part B and collected in accordance with the provisions of Part BB, of this Chapter, had not been taken into account.’.
Analysis:
While computing TDS on salary income of the employees following consideration should be taken into account:
- Credit of TCS paid by the employee should be allowed
- TDS deducted under any other head of Income should be considered while determining TDS on Salary.
- Loss on Account of House property Income
- Any income chargeable under any other head of Income
- Except under the head “Income from house property” no other head of Income should be considered which results in a loss.
III. TDS on the purchase of immovable property when there is more than one transferor & transferee
Effective Date of Amendment- 1st October, 2024
Amendment of Section-194-IA:
“Provided that where there is more than one transferor or transferee in respect of any immovable property, then the consideration shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors for transfer of such immovable property.”.
Analysis:
- Previously, for TDS calculation under Section 194-IA, the law was interpreted such that the consideration paid or credited referred to each individual buyer’s payment rather than the total consideration paid for the immovable property. Therefore, if a buyer paid less than Rs. 50 lakhs, no tax was deducted even if the total value of the immovable property exceeded Rs. 50 lakhs.
- To clarify, an amendment has been made to the section, stating that when there is more than one transferor or transferee in respect of an immovable property, the consideration shall be the aggregate of the amounts paid or payable by all the transferees to the transferors for the transfer of such immovable property.
IV. Insertion of Section 194T – TDS on payment of salary, remuneration, interest, bonus or commission by partnership firm to partners
Effective Date of Amendment- 1st April, 2025
Insertion of Section-194T:
“ (1) Any person, being a firm, responsible for paying any sum in the nature of salary, remuneration, commission, bonus or interest to a partner of the firm, shall, at the time of credit of such sum to the account of the partner (including the capital account) or at the time of payment thereof, whichever is earlier shall, deduct income-tax thereon at the rate of ten per cent.(2) No deduction shall be made under sub-section (1) where such sum or the aggregate of such sums credited or paid or likely to be credited or paid to the partner of the firm does not exceed twenty thousand rupees during the financial year.”.
Analysis:
Section | 194T |
Nature of Transaction | Payment to Partners of Firm-
|
Deduction timeline | Credit or Payment whichever is earlier |
Limit | Rs 20,000/- during the FY |
Rate of TDS | 10 percent |
V. \Extending the scope for lower deduction of tax certificate to include Sections 194Q and 206C(1H)
Effective Date of Amendment- 1st October, 2024
a. Amendment of Section-197:
In section 197 of the Income-tax Act, in sub-section (1), for the figures and letter “194-O”, the figures and letters “194-O, 194Q” shall be substituted with effect from the 1st day of October, 2024
b. Amendment of Section-206C:
(e) with effect from the 1st day of October, 2024,––(i) in sub-section (9), for the words, brackets, figures and letter “sub-section (1) or sub-section (1C)” at both the places where they occur, the words, brackets, figures and letters “sub-section (1), sub-section (1C) or subsection (1H)” shall be substituted
Analysis:
To facilitate ease of doing business and to provide an option to seek a lower deduction certificate so as to reduce compliance burden on the assessee, it is proposed:
a) to amend sub-section (1) of section 197 to bring section 194Q in its ambit
b) to amend sub-section (9) of the section 206C to bring sub-section (1H) of section 206C in its ambit
14. Presumptive Taxation for Non-Residents in Business & Operations of Cruise Ships
Effective Date of Amendment- 1st April, 2025
(A) Insertion of Section-44BBC:
- Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of cruise ships subject to such conditions as may be prescribed, a sum equal to twenty per cent. of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”.
- The amounts referred to in sub-section (1) shall be the following, namely:—
(a) the amount paid or payable to the assessee or to any person on his behalf on account of the carriage of passengers; and
(b) the amount received or deemed to be received by or on behalf of the assessee on account of the carriage of passengers.’.
(B) Amendment of section 44B:
(b) in sub-section (1), after the words “business of operation of ships,”, the words, figures and letters “other than cruise ships referred to in section 44BBC,” shall be inserted
Analysis:
Provisions of section 44B relating to presumptive taxation for shipping business of non-residents, shall therefore, no longer apply to cruise-ship business.
PRESUMPTIVE TAXATION
Section | 44BBC |
Taxation type | Presumptive Taxation |
Nature of Business | Cruise Ship Operator |
Applicability | Non-residents only |
Tax Rate | 20% on Taxable Income |
Taxable Income | On account of carriage of passengers
|
15. Income Exempted in the hands of Foreign Company for Lease Rentals received from Cruise Ship Operator
Effective Date of Amendment- 1st April, 2025
Insertion of Section-10(15B):
“any income of a foreign company from lease rentals, by whatever name called, of cruise ships, received from a specified company which operates such ship or ships in India, where such foreign company and the specified company are subsidiaries of the same holding company, and such income is received or accrues or arises in India for any relevant assessment year beginning on or before the 1st day of April, 2030”
Definitions for this clause:
Specified Company | means any company, other than a domestic company which operates cruise ships in India and opts to pay tax in accordance with the provisions of section 44BBC; |
Holding company | in relation to a foreign company or a specified company, means a company of which such companies are subsidiary companies; |
Subsidiary company/ Subsidiary | In relation to a holding company, means a company in which the holding company exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies |
Analysis:
Lease rentals paid by a company which opts for presumptive regime under section 44BBC (‘the first company’), shall be exempt in the hands of the recipient company, if such company is a foreign company and such recipient company and the first company are subsidiaries of the same holding company
