Several key Income Tax, rate, regulatory and compliance rule changes, introduced in the Union Budget 2024 by Finance Minister Nirmala Sitharaman, will come into effect from October 1, 2024.
The most important six ones among them are as follows: –
1. Direct Tax Vivad Se Vishwas Scheme (VSV) 2024
The Vivad Se Vishwas Scheme 2024 is set to be implemented starting October 1, providing taxpayers with an opportunity to settle pending tax disputes. The scheme applies to disputes related to taxes, penalties, interest, or fees that are pending before appellate bodies, including the High Courts and Supreme Court, as of July 22, 2024.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
Taxpayers opting for settlement by December 31, 2024, will either pay the full disputed tax amount or 25% of the disputed interest and penalty. Post-December 31, the payment requirement increases to 110% of the tax or 30% of penalties and interest.
2. Aadhaar and PAN Linking
From October 1, 2024, the provision allowing individuals to use their Aadhaar Enrolment ID in place of their Aadhaar number when applying for a PAN will be discontinued.
This move, aimed at reducing PAN misuse and duplication, mandates that all individuals eligible for an Aadhaar number must quote it in their PAN application and income tax returns. The Aadhaar-PAN linkage requirement was first introduced in 2017 to streamline tax filings and prevent fraudulent PAN applications.
3. Increase in Securities Transaction Tax (STT)
Effective October 1, the STT on futures and options ( F&O ) trading will increase. For futures, the STT will rise to 0.02%, while for options, it will go up to 0.1% of the premium. This adjustment reflects the government’s intent to align taxation with growing market activity in the derivatives sector, ensuring tax levels correspond with transaction values.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
4. Floating TDS Rate
The 2024 Budget introduced a 10% TDS on central and state government bonds, including floating-rate savings bonds, effective October 1. TDS will apply only when the income exceeds ₹10,000 per year, ensuring smaller investors are not burdened. This change modifies Section 193 of the Income Tax Act and encompasses various government securities.
5. Reduction in TDS Rates
Several TDS rates will be reduced starting October 1, 2024. Payments under Sections 194DA (life insurance policy payments), 194H (commission/brokerage), and 194M (certain individual or HUF payments) will now attract a 2% TDS instead of the previous 5%. Additionally, TDS for e-commerce operators under Section 194O will reduce from 1% to 0.1%, benefiting small business operators.
6. Taxation of Share Buybacks
A significant change from October 1, 2024, is the shift in tax responsibility for share buybacks. Under the new rules, shareholders, rather than companies, will be taxed on buyback proceeds.
This brings buyback taxation in line with dividend taxation, with companies required to withhold TDS at 10% for residents and 20% for non-residents. This change could impact corporate strategies and shareholders’ returns.
These changes, aimed at streamlining tax policies and improving compliance, cover a range of topics including the Direct Tax Vivad Se Vishwas Scheme, modifications to Aadhaar-PAN regulations, changes in Securities Transaction Tax (STT), Tax Deducted at Source (TDS) rates, and adjustments in taxation for share buybacks.
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