The finance ministry is gearing up for its pre-budget meetings, which will start on October 10 and continue until November 11. These meetings will review the fiscal plans of six key ministries and departments, including New & Renewable Energy and Skill Development & Entrepreneurship.
Additionally, several crucial changes introduced in the Union Budget 2024 by Finance Minister Nirmala Sitharaman will be effective from October 1. Here’s a breakdown of these changes and what they mean for you.
6 Income Tax Rules To Be In Effect From October 1, 2024
Changes |
Impact |
|---|---|
Aadhaar Usage for PAN and ITR |
Discontinuation of Aadhaar Enrolment ID for PAN and ITR |
Securities Transaction Tax (STT) |
Increased rates on futures, options, and share buybacks |
Floating Rate Bonds TDS |
TDS at 10% for interest income above ₹10,000 |
TDS Rate Adjustments |
Reduction in TDS rates for multiple categories |
Direct Tax Vivaad se Vishwas Scheme 2024 |
Settlement opportunities for pending disputes |
Buy-back of Shares |
Introduction of shareholder-level taxes |
1. Aadhaar No Longer Applicable for PAN and ITR
The Union Budget 2024 has introduced a significant change – quoting the Aadhaar Enrolment ID will no longer be acceptable for PAN applications and Income Tax Returns (ITR) from October 1, 2024.
- Why This Change?
- The aim is to prevent misuse and duplication of PAN numbers.
- With an increase in Aadhaar coverage across the country, it’s now deemed unnecessary to continue using Aadhaar Enrolment IDs.
The Budget memorandum stated, “Since the introduction in 2017, Aadhaar coverage has expanded, making this measure essential to avoid duplication and misuse.”
2. Securities Transaction Tax (STT) Update
STT rates will be increased from October 1, 2024, for futures and options trading. Here’s a quick look at the changes:
Type of Transaction |
Old Rate |
New Rate |
Applicable From |
|---|---|---|---|
Futures Trading |
Existing rate + 0.02% |
Increased rate |
October 1, 2024 |
Options Trading |
Existing rate + 0.1% |
Increased rate |
October 1, 2024 |
- Impact:
- Tax on Buyback of Shares: Income received from share buybacks will now be taxed in the hands of shareholders.
- This move is expected to align tax levels with the growing market activity and transaction values.
3. Floating Rate Bonds TDS
The budget has introduced changes in the Tax Deducted at Source (TDS) on central and state government bonds, including floating rate bonds.
- New TDS Rate: 10%
- Threshold: Applicable only if annual earnings exceed ₹10,000.
This amendment also includes changes to Section 193 of the Income Tax Act, 1961, which now imposes TDS on the Floating Rate Savings Bond, 2020 (Taxable).
4. Revised TDS Rates Effective October 1, 2024
The Finance Bill 2024 has brought significant reductions in TDS rates for various sections, making it easier for taxpayers. Below is a simplified table highlighting these changes:
Section |
Nature of Payment |
Old Rate (%) |
New Rate (%) |
|---|---|---|---|
194DA |
Life insurance policy payments |
5 |
2 |
194G |
Commission on lottery ticket sales |
5 |
2 |
194H |
Commission or brokerage payments |
5 |
2 |
194-IB |
Rent payments by individuals/HUFs |
5 |
2 |
194M |
Payments by individuals/HUFs for contracts |
5 |
2 |
194F |
Mutual fund/UTI unit repurchase payments |
5 |
Deleted |
194-O |
E-commerce operator payments |
1 |
0.1 |
- These reductions will benefit a wide range of taxpayers, easing the overall tax burden.
5. Direct Tax Vivaad se Vishwas Scheme 2024
The Direct Tax Vivaad se Vishwas Scheme (DTVSV), 2024 aims to settle pending income tax disputes and offers a lower settlement amount for taxpayers.
- Old vs. New Appellants: New appellants benefit from a lower settlement amount compared to those who have been in dispute longer.
- Deadline: Those who declare before December 31, 2024, will enjoy better settlement terms than those who do so afterward.
6. Share Buy-back Tax
Starting October 1, buyback of shares will be subject to shareholder-level taxes, similar to dividends.
- Impact on Investors:
- Potential for a higher tax burden.
- Shareholders’ acquisition costs will be factored into capital gains/losses calculations.
Upcoming Budget Meetings
The pre-budget meetings led by the Secretary (Expenditure) are scheduled to commence in the second week of October 2024. These discussions will cover:
- Budgetary allocations for FY 2025-26
- Revised estimates for the current fiscal year
The Budget Circular issued by the Department of Economic Affairs stated that the Union Budget 2025-26 will be presented on February 1, 2025, during Parliament’s first session.
Key Ministries and Departments in Focus
Ministry/Department |
Discussion Date |
|---|---|
Ministry of Railways |
November 11, 2024 |
Department of Health and Family Welfare |
November 11, 2024 |
These discussions aim to finalize the budgetary allocations, with the upcoming Union Budget 2025-26 expected to focus on reforms to accelerate economic growth and job creation.
What’s Next?
As we head into this pre-budget season, keep an eye out for:
- Policy changes that could impact your finances
- Tax updates that might affect your investments
- Government initiatives that could shape the country’s economic landscape
The budget is more than just numbers—it’s a reflection of the country’s priorities and a roadmap for growth. Stay informed, stay prepared!
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