FM Sitharaman Announces Major Income-Tax Reforms for FY 2024-25

Finance Minister Nirmala Sitharaman introduced crucial income-tax reforms aimed at simplifying laws, boosting compliance, and promoting growth. Highlights include revised tax slabs, increased deductions, and streamlined tax procedures.

Finance Minister Nirmala Sitharaman has unveiled a comprehensive set of income-tax reforms for the fiscal year 2024-25, designed to simplify tax laws, encourage compliance, and spur economic growth. The finance minister underscored the adoption of the simplified corporate tax regime, which constituted 58 percent of corporate tax revenue in 2022-23.

In another significant move, two-thirds of personal tax filers are now opting for the new tax regime. The government is conducting a thorough review of the Income Tax Act, expected to be completed within the next six months. To offer relief to taxpayers, the FM has increased the tax slabs for personal income tax, with no tax applicable on income up to Rs 3 lakh, similar to the previous year.

Income between Rs 3-7 lakh will now incur a 5 percent tax, a change from the previous 5 percent applied to income between Rs 3-6 lakh. Earnings from Rs 7-10 lakh will attract a 10 percent tax, a shift from the earlier 10 percent on Rs 6-9 lakh. Income between Rs 10-12 lakh sees a new 15 percent tax, up from the earlier 15 percent on Rs 9-12 lakh. Tax rates for income between Rs 12-15 lakh and above Rs 15 lakh remain unchanged at 20 percent and 30 percent, respectively.

Additional taxpayer relief includes an increased standard deduction from Rs 50,000 to Rs 75,000 and a higher family pension deduction from Rs 15,000 to Rs 25,000. The employer contribution deduction under section 80CCD has been raised from 10 percent to 14 percent of the employee's salary. This increase allows non-government employees in the new tax regime to claim a deduction of up to 14 percent of their salary. Further measures to ease tax burdens include merging tax exemption regimes for charities, reducing TDS rates for e-commerce operators to 0.1 percent from 1 percent, and enabling TCS credit against TDS on salaries.

To streamline tax administration and minimize litigation, Sitharaman announced simplified reopening and reassessment procedures, rationalized SOPs for TDS defaults, and issued new compounding guidelines. A simplified tax regime for foreign shipping companies operating domestic cruises has also been introduced. Income from buybacks will now be taxed, and penalties for non-reporting of movable assets valued at Rs 20 lakh are being removed.

Moreover, the equalization levy, a tax on digital transactions, is being withdrawn. (ANI)

(With inputs from agencies.)