Salient Changes in the new Income Tax Rules relevant to Assessment Year 2024-25

Some major changes in Income Tax Rules relevant to Assessment Year 2024-25 are as below:

Changes in Income Tax Slabs:

The income tax slabs under the new tax regime have been reduced to five from six. The basic exemption limit has been increased to Rs. 3 lakh from Rs. 2.5 lakh earlier. The amount of rebate under Section 87A has been enhanced to taxable income of Rs. 7 lakh from Rs. 5 lakh earlier.

New Tax regime is a default Option- Option to switch between Old and New Tax regime removed

The new tax regime has been made the default option for all taxpayers, except for co-operative societies. The option to switch between the old and new tax regimes has been removed. The taxpayers who have opted for the new tax regime in the previous year cannot revert to the old tax regime in the current year.

The new tax regime has been extended to association of persons (other than co-operative societies), body of individuals, and artificial juridical persons. The tax rates applicable to these entities are the same as those applicable to individuals and Hindu undivided families under the new tax regime.

Rationalization of Surcharges on income Tax for High Income Earners:

The surcharge rates under the new tax regime have been rationalized. The highest surcharge rate of 37% has been reduced to 25%. The surcharge rates for other income slabs remain unchanged.

Benefit of Standard Deduction to Salary earners and Pensioners now available in New Tax Regime Also.

The standard deduction of Rs. 50,000 has been allowed under the new tax regime. This deduction was not available in the previous year. The standard deduction is available to all salaried taxpayers and pensioners.

Lower income Tax rate for Co-operative societies that commence manufacturing before 31March 2024.

A new section 115BAD has been introduced to provide a lower tax rate of 15% for new co-operative societies that commence manufacturing activities before 31.3.2024. The co-operative societies opting for this section must fulfill certain conditions and forego certain deductions and exemptions.

Higher admissible deduction under section 80

The deduction under Section 80C for investments in specified instruments has been increased to Rs. 2 lakh from Rs. 1.5 lakh earlier. However it may be noted that to claim additional deduction of Rs 50,000 one needs to invest in National Pension Scheme u/s 80CCD (1B).

Benefit of section 80EEA extended for loans sanctioned till 31March 2024

The deduction under Section 80EEA for interest on loan taken for affordable housing has been extended to loans sanctioned up to 31.3.2024.

Benefit of section 80EEB extended for loans sanctioned till 31March 2025

The deduction under Section 80EEB for interest on loan taken for purchase of electric vehicle has been extended to loans sanctioned up to 31.3.2025.

Conveyance Allowance exempted to Divyang Employees

Conveyance allowance exemption for Divyang employees: Divyang employees are now eligible for exemption on conveyance allowance used for daily travel to and from work.

Deduction of TDS at lower rates for senior citizens

TDS on interest from bank deposits: TDS on interest from bank deposits will be deducted at the rate of 10% for non-senior citizens and 7.5% for senior citizens.

Changes in Taxation of Maturity proceeds of Insurance Policies

Maturity proceeds from life insurance policies (except Unit Linked Insurance Plans) issued on or after April 1, 2023, exempt only if the annual premium paid for any year during the policy term doesn’t exceed Rs. 5 lakhs. This limit also applies to aggregate premiums across multiple policies.

Death benefit remains exempt from tax.

Income from Debt Mutual funds will no longer get benefit of Long Term Capital Gains

The income from Debt mutual funds shall no longer be eligible to get benefit of long term capital gains. Any gains will be taxable as per tax payers’ income slabs. As a result of this, the taxpayer’s with income slabs taxable at more than 10% shall be shelling out higher amount of income tax.

This change would also make investment in debt based mutual fund less attractive compared to fixed deposits.

Maturity Amount from Insurance Proceeds to be taxable in certain cases

Now Life insurance money would not be fully exempt from income tax. As per the new rule, if the total premium paid on all non-ULIP life insurance policies exceeds Rs 5 lakh in a financial year, then the maturity amount will be taxable.

For ULIP policies, the maturity amount is eligible for taxes if the premium payable is more than Rs 2.5 lakh in a given financial year.

Cap on Maximum deduction on Capital Gains arising from sale of residential property

Effective Ay 2024-25, the maximum deduction on capital gains arising from sale of residential property shall be limited to Rs 10 Crore.

Taxpayers now have option to discard the income tax returns filed but not yet verified by them

This option has been made available to Tax Payers; whereby they can delete and discard the returns filed but not yet verified by them. This will be helpful to them as they can rectify the errors in return before verification of the return filed by them