The income tax system in India is undergoing changes. In 2024, several major changes were rolled out as a result of the government’s emphasis on hoisting compliance and simplifying tax requirements. Such changes are important for taxpayers in the course of fulfilling their income tax obligations in 2025. This story will discuss 8 income tax changes that all senior individuals and business corporations must be aware of.
The key changes made to the Income Tax rules which will impact the taxpayer’s Income Tax Return (ITR) filing in 2025 are as follows:1) Revised Income-Tax slabs under the New Tax Regime: The government has updated the income tax slabs for the new tax regime to provide more savings for individual taxpayers. The new slabs for FY 2024-25 are as follows:
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2) Enhanced Standard Deduction Limit: Under the new tax regime, the standard deduction has been raised from Rs 50,000 to Rs 75,000. "For family pensioners, the limit has also been increased from Rs 15,000 to Rs 25,000. It is important to note that no changes have been made to the standard deduction limit under the old tax regime for FY 2024-25," says CA (DR.) Suresh Surana.
3) Increased Deduction for Employer Contributions to NPS: In the new tax regime, the deduction for employer contributions to the National Pension System (NPS) has been raised from 10% to 14% of the basic salary. Surana says, "This deduction, available under Section 80CCD(2) of the Income Tax Act, 1961 (referred to as ‘the IT Act’), is among the limited deductions allowed under the new regime, alongside the standard deduction."
4) Revised Long-Term Capital Gains Tax Rates: The tax rate on long-term capital gains from the transfer of specified capital assets, such as listed equity shares subject to STT, units of equity-oriented funds, and business trusts, has been increased from 10% to 12.5%. Additionally, the exemption threshold under Section 112A for long-term capital gains has been raised from Rs. 1 lakh to Rs. 1.25 lakh.
5) Revised Short-Term Capital Gains Tax Rates: The tax rate for short-term capital gains under Section 111A of the Income Tax Act, applicable to STT-paid equity shares, units of equity-oriented mutual funds, and units of business trusts, is increased from the current 15% to 20%. "Other short-term capital gains will continue to be taxed at the applicable slab rates," Surana adds.
6) Revised Capital Gains Tax rate for Immovable property: The tax rate on long-term capital gains from immovable property has been reduced to 12.5%, down from the previous rate of 20%. However, no indexation benefit will be allowed in these cases. The holding period for long-term capital gains remains at 24 months. Additionally, resident individual taxpayers or Hindu Undivided Families will have the option to choose between taxing the capital gains at 12.5% without indexation or at 20% after applying indexation, whichever is more beneficial. This applies to long-term capital gains arising from the sale of land, buildings, or both, acquired before 23rd July 2024.
7) Revision in the Holding period for determination of long-term or short-term capital asset: Post the Finance Act 2024, there are only two holding periods, 12 months and 24 months, for determining whether the capital gains are short-term capital gains or long-term capital gains. Surana said, "For all listed securities (including units of a listed business trust), the holding period is proposed to exceed 12 months and for all other assets, it shall exceed 24 months for qualifying as long-term capital gain. The holding period for bonds, debentures, gold, etc. has been reduced from 36 months to 24 months. For unlisted shares and immovable property, it shall remain at 24 months."
8) Increased Securities Transaction Tax (STT): The Securities Transaction Tax has been raised for equity derivatives trades. Specifically, the STT on futures has increased from 0.0125% to 0.02%, and on options, from 0.0625% to 0.1%. "This change, effective from October 2024, may impact the cost of trading in the derivatives market for taxpayers engaged in trading in capital markets. STT amount is considered while calculating the capital gains, and any resulting gains or losses are taxed accordingly," said Surana.