Key Income Tax Reforms in 2024 You Need to Know for Your 2025 ITR Filing

The year 2024 witnessed transformative changes to India’s income tax laws, significantly impacting how taxpayers will file their Income Tax Returns (ITRs) in 2025. Introduced amidst the backdrop of general elections, these reforms, effective from FY 2024-25, include revamped tax slabs, simplified capital gains taxation, and rationalised TDS rates. Here’s an in-depth look at the top changes and their implications for taxpayers.

1. Revised Income Tax Slabs Under the New Tax Regime

The government introduced a new tax regime with updated slabs designed to benefit individual taxpayers. Key changes include:

• Income up to ₹3,00,000: Tax-exempt.
• Income ₹3,00,001–₹7,00,000: Taxed at 5%.
• Income ₹7,00,001–₹10,00,000: Taxed at 10%.
• Income ₹10,00,001–₹12,00,000: Taxed at 15%.
• Income ₹12,00,001–₹15,00,000: Taxed at 20%.
• Income above ₹15,00,000: Taxed at 30%.

These changes enable taxpayers opting for the new regime to save up to ₹17,500 annually.

2. Higher Standard Deduction Limits

Under the new regime, the standard deduction for salaried individuals has been increased to ₹75,000 (from ₹50,000), and for family pensioners to ₹25,000 (from ₹15,000). The old tax regime retains its ₹50,000 limit for salaried individuals and ₹15,000 for family pensioners.

This increase effectively lowers taxable income, making the new tax regime more attractive.

3. Enhanced NPS Deduction

The deduction limit for employer contributions to the National Pension System (NPS) has been raised to 14% of the basic salary under the new tax regime, up from 10%. However, contributions exceeding ₹7.5 lakh across EPF, NPS, and superannuation funds remain taxable.

4. Simplified Capital Gains Taxation

Capital gains taxation has been streamlined:

• Short-Term Capital Gains (STCG): Taxed at 20% (previously 15%).
• Long-Term Capital Gains (LTCG): Taxed at 12.5% uniformly across all assets.

Equity and equity-oriented funds continue to enjoy an annual exemption of up to ₹1.25 lakh. While these changes simplify tax calculations, they limit indexation benefits for certain assets.

5. Rationalised TDS Rates

The government has rationalised TDS (Tax Deducted at Source) rates to reduce complexity:

• Insurance commissions: 2%.
• Rent: 2%.
• E-commerce payments: 0.1%.

This adjustment reduces upfront deductions, allowing taxpayers to retain more money initially.

6. New Rules for TDS on Property Sales

TDS is now applicable on the entire sale value for property transactions exceeding ₹50 lakh, regardless of the individual seller’s share. This change aims to enhance compliance and prevent TDS evasion.

7. Improved TDS and TCS Credit Adjustments

Salaried individuals can now offset TDS or TCS deductions from other income sources against TDS on their salary. This eases cash flow concerns and ensures higher monthly take-home pay.

8. Reintroduction of Vivad Se Vishwas Scheme 2.0

The Vivad Se Vishwas Scheme 2.0 has been reintroduced to facilitate amicable settlement of tax disputes. This initiative aims to reduce litigation and provide taxpayers with a streamlined resolution process.

9. Mandatory Aadhaar for ITR Filing and PAN Applications

Starting October 2024, Aadhaar will be mandatory for filing ITRs and applying for PAN cards. Aadhaar enrolment numbers will no longer be accepted, potentially complicating processes for individuals without Aadhaar.

10. Reduced Time Limit for ITR Revisions

The time limit for reopening old ITRs has been reduced to five years for cases involving income escaping assessments above ₹50 lakh. This change aims to minimise prolonged litigation and provide greater certainty.

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