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Finance Update: Union Finance Minister Nirmala Sitharaman introduced some income tax changes in the Union Budget 2024. Some of the changes are already in place, while others are expected to come into effect from October 1, 2024. The most significant ones include Aadhaar card, STT, TDS rate, and the Direct Tax Vivad Se Vishwas Scheme 2024, which were incorporated in the Finance Bill 2024.
Here are the details one needs to know about the ones that became effective from 1st October.
1. Direct Tax Vivad Se Vishwas Scheme 2024
Starting 1st October, taxpayers would be allowed to set some specific pending tax disputes under the Vivad se Vishwas scheme. This provision was introduced first in 2020 to resolve pending tax appeals. After its success, Finance Minister Nirmala Sitharaman included the 2024 modified version of it in the Union Budget to settle disputes arising after that date.
The Vivad se Vishwas scheme directs the resolution of disputes pending by July 22, 2024. In the Vivad se Vishwas scheme, taxpayers who have pending issues before the appellate bodies, the high courts, or the Supreme Court with regard to any tax, interest, penalties, or fees are eligible to participate under it.
Under this arrangement, the amount of settlement depends on when the payment is made. On this score, some taxpayers must pay all or 25% of the disputed tax, interest, penalty, or fee depending on whether one settles within October 1, 2024, to December 31, 2024.
2. Aadhaar card
The Union Budget 2024 has also proposed abolishing the provision that quoting of Aadhaar Enrolment ID instead of Aadhaar number is available. This has been done considering that it was misused and getting duplicated PAN. From 1 October, 2024, quoting of Aadhaar Enrolment ID will not be allowed in the application form for allotment of PAN and in income tax return.
Quoting the Budget memorandum, individuals eligible for an Aadhaar number shall quote it in the PAN application form and income tax returns, w.e.f. July 1, 2017, pursuant to Section 139AA of the Act.
3. STT
The Securities Transaction Tax or STT on futures and options (F&O) is to be increased from October 1, 2024. While ahead, the tax rates for Futures & Options (F&O) of securities are going to increase to 0.02% and 0.1%, respectively, income earned from share buybacks is now going to be taxable as per the taxable income of the beneficiaries. Besides, the STT on selling options would go up from 0.0625 per cent of the premium to 0.1 percent. Of immense importance to be noted here is that STT is charged at the time of buying and selling of most other securities, too, for equity shares, futures and options.
4. Floating rate of TDS
The most significant changes that Budget 2024 brought about were related to Tax Deduction at Source, particularly the central and state government bonds, floating rate bonds, etc. The TDS on those above-mentioned bonds will be effective from October 1, 2024, which will be at 10%.
The Floating Rate Savings Bond has also been incorporated in the newly introduced TDS regulation. However, if the income generated throughout the year is less than Rs 10,000, then TDS will not be deducted. TDS would be deducted only when the income exceeds the limit of Rs 10,000.
The Budget 2024 mooted the amendment of section 193 of the Income-tax Act, 1961 and provides for TDS on such Floating Rate Savings Bonds, 2020 (Taxable) and any other security issued by the Central or State Government which is notified by the Central Government.
5. TDS rates
These TDS rates for payments u/s 19DA, 194H, 194-IB, and 194M have been reduced. Now the rates stand at 2% instead of the previous 5% for these sections. Another, TDS rate under section 194M has been brought down from 1% to 0.1%.
6. Buyback of shares
The regulation related to taxing share buy-backs will come into effect from October 1st. As per the prevailing tax laws, instead of the company, the shareholders will now have to pay taxes against the buyback proceeds, almost similar to what happens when dividends are received. This will lead to an effective shift in the tax burden of a company on its shareholders and will significantly alter the buy-back strategies.
Important points are:
Tax Re-distribution: The 20% tax levied upon companies on buy-backs will be withdrawn. Instead, the buyback proceeds would result in taxes for shareholders in the hands of the shareholders as dividend income based on the different tax-brackets of the respective shareholders.
TDS Provision: Companies have to impose TDS at a rate of 10% for resident individuals and 20% for non-resident individuals on buy-back proceeds.
