Amendments In Income Tax Act 1961 through Finance Act, 2024

The Finance (No. 2) Bill, 2024 was presented by the Hon'ble Finance Minister (FM) Nirmala Sitharaman on 23 July 2024. While moving the Bill for approval by the Lok Sabha on 7 August 2024, the FM introduced amendments to FB (No, 2) 2024 (Amended Bill) and the bill was passed on 16th of August, 2024 in form of THE FINANCE (No. 2) ACT, 2024. I have made a gist of major amendments brought in force in Income Tax Act 1961 through Finance Act, 2024.

1. INCOME TAX RATE

A. Amendment In Personal Tax Rates (New Tax Regime)

Note - No deduction available except mentioned below:

• Standard Deduction u/s 16(ia) for Salary has been increased from Rs 50,000 to Rs. 75,000
• Family Pension u/s 57(iia) has been increased from Rs 15,000 to Rs. 25,000
• Deduction for contribution u/s. 80 CCD(2) in National Pension Fund has been raised from 10% to 14% for other than government employers and has been brought in par with government employer contribution.
• This amendment would apply in relation to AY 2025-26

NO CHANGE IN TAX RATE IN THE OLD REGIME

B. Change in Rate of Tax on Capital Gain

• The taxation of Short-Term Capital Gain for listed equity shares, a unit of an equity-oriented fund, and a unit of a business trust has been increased to 20% from 15%. Other financial and non-financial assets which are held for short term shall continue to attract the tax at slab rates.
• The limit on the exemption of Long-Term Capital Gains on the transfer of equity shares or equity-oriented units or units of Business Trust has increased from Rs.1 Lakh to Rs.1.25 lakh per year. However, the rate at which it is taxed has also been increased from 10% to 12.5%. The tax rate has been changed from 23rd July 2024.
• The tax on long-term capital gains on other financial and non-financial assets (other than Immovable Property) is reduced from 20% to 12.5%, however indexation benefit that was previously available on sale of long-term assets, has now been withdrawn. This amendment is only for all the transaction carried out post 23rd of July, 2024.
• That in case of Immovable Property acquired by Individual & HUF before 23rd of July,2024 an assessee and sold after this date and if it's a long term asset then the assessee has option to pay tax @ 20% after indexation or pay 12.5% of Tax with no indexation. For purchases of property after the cut-off date of 23rd of July,2024 only the new regime with LTCG tax at the rate of 12.5 per cent without indexation will be applicable.
• The Grandfathering clause for all the asset acquired proper to 01.04.2001 and in case of listed shares 31.01.2018 will still be available.

The Existing & Amended Tax rate on Capital Gains w.e.f from 23rd of July, 2024 are as under:

C. Foreign Company

· The tax rate has been reduced from 40% to 35% in case of foreign companies.

2. DEFINITIONS

A. Section 2(22)(f)- Payment on Buy Back of Share is Deemed Dividend

· Any payment by a company on purchase of its own shares from its shareholders (Buy back of Shares) in accordance with the provisions of section 68 of the Companies Act, 2013 shall be consider as Deemed Dividend in the hand of Shareholder.

· This amendment would apply from 01st of October, 2024 and thereafter.

B. Section 2(42A)- Capital Asset Holding Period

· For All Listed Securities the holding period is proposed to be 12 Months to be called Short Term Capital Asset and after that they will be Long Term Capital Asset.

· For All Other Assets (Like Immovable Property, Unlisted Shares) the holding period is proposed to be 24 Months to be called Short Term Capital Asset and after that they will be Long Term Capital Asset.

· This amendment would apply from 23rd of July, 2024 and thereafter.

3. INCOME FROM HOUSE PROPERTY

A. Section 28- Rental income From House Property cannot be chargeable under PGBP

• Any income from letting out of a residential house or part of the house by the owner shall not be chargeable under Profits From Business & Profession but shall be chargeable under House Property.
• This amendment would apply in relation to AY 2025-26 and thereafter.

4. INCOME FROM BUSINESS AND PROFESSION

A. Section 36(1)(iva) - Other Deduction Allowed

• The amount of contribution allowed towards pension scheme by the other employer other than government employer as deduction has been increased from the extent of 10% to 14% of the salary of the employee in previous year.
• This amendment would apply in relation to AY 2025-26 and thereafter.

B. Section 37(1)(iii)- Disallowance of Settlement Amounts being paid under any Law

• In Explanation 3 clause (iv) has been added that which clarifies that no deduction will be available for expenditure incurred by an assessee to settle proceedings initiated in relation to contravention under any such law as may be notified.
• This amendment would apply in relation to AY 2025-26 and thereafter.

C. Section 40(b)(v)- Partner's Remuneration

• The limit of Partner's remuneration allowable as deduction has been increased as follows:

• This amendment would apply in relation to AY 2025-26 and thereafter.

5. CAPITAL GAINS

A. Section 46A- Capital Gain on Buy Back of Shares

• The value of consideration will be NIL in case of shares Buy Back By the company as per section 2(22)(f).
• The cost of acquiring such shares can be claimed as capital loss and can be adjusted/carried forward as per the relevant sections of the act.
• This amendment would apply from 01st of October, 2024 and thereafter.

B. Section 47(iii)- Transaction Not Regarded as Transfer

• Clause 47(iii) is amended and now following transfer won't be regarded as transfer:

"Any Transfer of a capital asset by an individual, or HUF under a gift or will or an irrevocable trust"

• This amendment would apply in relation to AY 2025-26 and thereafter.

C. Section 48- Indexation Benefit available only upto 23rd of July,2024

• Second Proviso of Section 48 states that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company then the words "cost of acquisition" and "cost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any improvement" had respectively been substituted:
• Now the date has been added in the proviso i.e. 23rd of July, 2024. This means indexation benefit could be taken only for immovable property acquired before 23rd of July, 2024.
• Now, individuals or HUFs who have purchased property before July 23, 2024, can opt to pay LTCG tax under the new scheme at the rate of 12.5% without indexation or claim the indexation benefit and pay 20% tax.
• This amendment would apply from 23rd of July, 2024 and thereafter.

D. Section 50AA- Capital gains on transfer of Specified Mutal Fund/Unlisted Bonds or Unlisted Debenture

• Any gains arising from the transfer or redemption or maturity of Specified Mutual Fund(Debt), Unlisted Bonds or Unlisted Debentures shall be considered Short Term Capital Only and will be taxable at the Slab rates.
• Specified Mutual Fund means--

(a) a Mutual Fund by whatever name called, which invests more than sixty-five per cent. of its total proceeds in debt and money market instruments; or

(b) a fund which invests sixty-five per cent. or more of its total proceeds in units of a fund referred to in sub-clause (a):

Provided that the percentage of investment in debt and money market instruments or in units of a fund, as the case may be, in respect of the Specified Mutual Fund, shall be computed with reference to the annual average of the daily closing figures.

• This amendment would apply from 23rd of July, 2024 and thereafter.

E. Section 55(2)(ac)- Deemed Cost of Shares

· Section 55 provides for deemed cost of long-term asset in form of listed equity shares, units of equity oriented fund or unit of business trust acquired before 1st Day of February, 2018 which is higher of :

(i)the cost of acquisition of such asset; and

(ii)lower of-

(A)the fair market value of such asset; and

(B)the full value of consideration received or accruing as a result of the transfer of the capital asset.

· That now in the Explanation, in clause (a), in sub-clause (iii), after item (A), the following item shall be inserted:

"(AA) not listed on a recognised stock exchange as on the 31st day of January, 2018, or which became the property of the assessee in consideration of share which is not listed on such exchange as on the 31st day of January, 2018 by the way of transaction not regarded as transfer under section 47, as the case may be, but listed on such exchange subsequent to the date of transfer (where such transfer is in respect of sale of unlisted equity shares under an offer for sale to the public included in an initial public offer)

· So, cost of unlisted shares acquired through gift before the 31st Day of January,2018 will be as per above formula.

· This amendment would apply retrospectively from AY 2018-19 thereafter.

6. INCOME FROM OTHER SOURCES

A. Section 56(2)(viib)- Angel tax Abolished

· In case of Starup if the total investment exceeds the FMV (Fair Market Value) then investment grater then FMV has to be categorised as income from other sources.

· This section has now been abolished.

· This amendment would apply in relation to AY 2025-26 and thereafter.

B. Section 57(i)- Buy Back of Shares

· Now amount received from Buy Back of Shares will be taxable under Other Sources at slab rate and any expense incurred inform of commission or interest for earning such income can be claimed as deduction.

· This amendment would apply from 01st of October, 2024 and thereafter.

C. Section 57(iia)- Family pension

· If the assessee is filling its return under new regime and is in receipt of any family pension then in that case deduction of 33.33% or Rs 25,000 which is ever is less can be claimed.

This amendment would apply from 01st of October, 2024 and thereafter.

7. CHAPTER VI-A DEDUCTIONS

A. Section 80CCD(2)- Contribution To Pension Scheme by Private Sector Employer

· The deduction of amount contributed by the private sector employer in the pension scheme has been increased from 10% to 14%.

· This is applicable only for employee file return under new regime.

· This amendment would apply in relation to AY 2025-26 and thereafter.

8. CHARATIABLE & RELIGIOUS TRUST

A. Section 11(7)- Inclusion of reference of clause (23EA), clause (23ED) and clause (46B) of section 10 in sub-section (7) of section 11

• Sub-section (7) of section 11 of the Act lays down that registration under section 12AB shall become inoperative, if the trust or institution is approved / notified under clause (23C), (23EC), (46) or (46A) of section 10. Such trust or institution has a one-time option to apply to make its registration under section 12AB operative. Thus, a trust or institution may choose the provisions under which it seeks to claim exemption.
• That the sub-section (7) of section 11 of the Act is amended to include reference of clause (23EA), clause (23ED) and clause (46B) of section 10 of the Act, to enable trusts under the second regime to claim exemption under the above-noted specific clauses of section 10.
• This amendment would apply in relation to AY 2025-26 and thereafter.

B. Section 12A- Merger of trusts under first regime with second regime

• There are currently 2 regimes of registrations for charitable trust- First one in section 10(23C) and second one under sections 11 to 13 of the Act.
• That now all trusts, funds or institutions be transited to the second regime in a gradual manner.
• For that the following amendment are done:

a) Applications seeking approval or provisional approval under sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10, and filed on or after 1st October, 2024, shall not be considered.

b) Applications filed under these sub-clauses before 1st October, 2024, and which are pending would be processed and considered under the extant provisions of the first regime itself.

c) Approved trusts, funds or institutions would continue to get the benefit of exemption, as per the provisions of sub-clauses (iv), (v), (vi) or (via) of clause (23C) of section 10, till the validity of the said approval.

d) They would be eligible to apply for registration, subsequently, under the second regime. Amendments have accordingly been proposed in section 12A.

e) Certain eligible modes of investment, under the first regime (viz. those specified in clause (b) of third proviso to clause (23C) of section 10) shall be protected in the second regime, by way of amendment in section 13.

• This amendment would apply from 1st of October, 2024 and thereafter.

C. Section 12A- Condonation of delay in filing application for registration by trusts or institutions

• Where the application is filed beyond the time allowed in sub-clauses (i) to (vi), the Principal Commissioner or Commissioner may, if he considers that there is a reasonable cause for delay in filing the application, condone such delay and such application shall be deemed to have been filed within time.
• This amendment would apply from 1st of October, 2024 and thereafter.

D. Section 12AB (3)- Rationalisation of timelines for funds or institutions to file applications seeking approval under section 80G

· The time line for passing the order under sub-section (1) shall be passed, in such form and

manner as may be prescribed, within a period of-

i) three months calculated from the end of the month in which the application was received in case of clause (a);

ii) six months calculated from the end of the quarter in which the application was received in case of sub-clause (ii) of clause (b); and

iii) one month calculated from the end of the month in which the application was received in case of clause (c).

· This amendment would apply from 1st of October, 2024 and thereafter.

E. Section 12AC- No Tax on Accreted Income on Merger of Trust

· Where any trust or institution registered under section 12AB or approved under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, as the case may be, merges with another trust or institution, the provisions of Chapter XII-EB shall not apply if--

a) the other trust or institution has same or similar objects;

b) the other trust or institution is registered under section 12AA or section 12AB or approved under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, as the case may be; and

c) The said merger fulfils such conditions as may be prescribed.

· This amendment would apply in relation to AY 2025-26 and thereafter.

9. ASSESSMENTS & APPEALS

A. Section 132 & 132A- Block assessment Provisions in cases of Search u/s. 132 and requisition u/s. 132A

The following provisions of Chapter XIV-B of the Act has been amended for assessment of search cases:

• The 'block period' shall consist of previous years relevant to six assessment years preceding the previous year in which the search was initiated under section 132 or any requisition was made under section 132A and shall include the period starting from the 1st of April of the previous year in which search was initiated or requisition was made and ending on the date of the execution of the last of the authorisations for such search or date of such requisition.
• Regular assessments for the block period shall abate. There will be one consolidated assessment for the block period. Till block assessment is complete, no further assessment/reassessment proceeding shall take place in respect of the period covered in the block.
• The assessment in respect of any other person shall be governed by the provisions of section 158BD and shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person.
• The tax rate shall be 60% for the block period. The tax chargeable under this section shall be increased by a surcharge.
• No interest under the provisions of section 234A, 234B or 234C or penalty under the provisions of section 270A shall be levied or imposed upon the assessee in respect of the undisclosed income assessed or reassessed for the block period.
• Penalty on the undisclosed income of the block period as determined by the Assessing officer shall be levied at 50% of the tax payable on such income. No such penalty shall be levied if the assessee offers undisclosed income in the return furnished in pursuance of search and pays the tax along with the return.
• The time-limit for completion of block assessment of the searched assessee shall be twelve months from the end of the month in which the last of the authorisations for search under section 132, or requisition under section 132A, was executed or made.
• The notice under clause (a) of sub-section (1) of section 158BC requiring the searched assessee to furnish his return of income for the block period, as well as the order of assessment for the block period shall be issued or passed, as the case may be, with the previous approval of the Additional Commissioner or the Additional Director or the Joint Commissioner or the Joint Director
• The provisions of section 144C (Dispute Resolution panel) of the Act shall not apply to any proceeding under the said Chapter.
• This amendment will take effect from the 1st day of September, 2024.

B. Section 148, 148A - Rationalisation of provisions relating to Assessment and Reassessment

The old provisions u/s. 148 & 148A have been substituted with the new provisions and its salient feature are as follows:

• Before making the assessment, reassessment or recomputation under section 147 and subject to the provisions of section 148A, the Assessing Officer shall issue a notice to the assessee, along with a copy of the order passed under sub-section (3) of section 148A determining it to be a fit case, requiring him to furnish a return of income within such period as may be specified, not exceeding a period of three months from the end of the month in which such notice is issued or the income of any other person in respect of whom he is assessable under this Act.
• No notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year.
• Provided further that where the Assessing Officer has received information under the scheme notified under section 135A, no notice under this section shall be issued without prior approval of the specified authority.
• Any information in the case of the assessee emanating from survey conducted under section 133A, other than under sub-section (2A) of the said section, is added to the definition of 'information' with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment.

Procedure u/s. 148A before issuance of Notice u/s. 148

• Where the Assessing Officer has information which suggests that income chargeable to tax has escaped assessment in the case of an assessee for the relevant assessment year, he shall, before issuing any notice under section 148, provide an opportunity of being heard to such assessee, by serving upon him a notice to show cause as to why a notice under section 148 should not be issued in his case, and such notice shall be accompanied by the information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year.

The major amendment made in new provisions is that the assessing officer does not have to conduct an enquiry before issuing the notice and can rely on the information.

• Thereafter, on receipt of notice under sub-section (1), the assessee may furnish his reply, within such time, as may be specified in such notice.
• The Assessing Officer shall, on the basis of material available on record and taking into account the reply of the assessee furnished under subsection (2), if any, pass an order with the prior approval of the specified authority under sub-section (3) of section 148A, determining whether or not it is a fit case to issue notice under section 148.
• The provisions of this section shall not apply in the case of an assessee where the Assessing Officer has received information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in his case
• This amendment will take effect from the 1st day of September, 2024.

C. Section 149- Time Limit for issuance of notice u/s. 148 & 148A

• No notice under section 148 shall be issued if 3 years and 3 months have elapsed from the end of the relevant assessment year if the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to less than fifty lakh rupees.
• Where the Assessing Officer has in his possession books of account or other documents or evidence related to any asset or expenditure or transaction or entry (or entries) which reveal that the income chargeable to tax, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more, notice under section 148 can be issued beyond the period of 3 years and 3 months but not beyond the period of 5 years and 3 months from the end of the relevant assessment year.
• No notice under section 148A shall be issued if 3 years have elapsed from the end of the relevant assessment year if the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to less than fifty lakh rupees.
• Where as per the information with the Assessing Officer, the income escaping assessment amounts to or is likely to amount to fifty lakh rupees or more, notice under section 148A can be issued beyond the period of 3 years but not beyond the period of 5 years from the end of the relevant assessment year
• This amendment will take effect from the 1st day of September, 2024.

D. Section 151- Specified Authority for section 148 & 148A

• Specified authority for the purposes of sections 148 and 148A shall be the Additional Commissioner or the Additional Director or the Joint Commissioner or the Joint Director, as the case may be.
• This amendment will take effect from the 1st day of September, 2024.

E. Section 152- Other Provisions

• For any a search has been initiated under section 132 or requisition is made under section 132A or a survey is conducted under section 133A on or after the 1st day of April, 2021 but before the 1st day of September, 2024, the old provisions of section 147 to 151 shall apply.
• Where a notice under section 148 has been issued or an order under clause (d) of section 148A has been passed, prior to the 1st day of September, 2024, the assessment, reassessment or recomputation in such case shall be governed as per the old provisions of sections 147 to 151.
• This amendment will take effect from the 1st day of September, 2024.

10. TDS & TCS

A. Section 192- TDS on Salary

• Any TDS deducted or collected should be taken in account for purpose of making deduction u/s 192(1).
• This amendment will be applicable from 1st of October, 2024.

B. Section 194IA- TDS on Sale of Immovable Property

• That where there is more than one transferor or transferee in respect of any immovable property, then the consideration shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors for transfer of such immovable property.
• This explanation is added to clear the confusion of checking the limit of Rs 50 Lakh in case of joint buyers.
• This amendment will be applicable from 1st of October, 2024.

C. Section 194T- TDS on Payment to Partner by Partnership Firm

• TDS has to be deducted by Firm for making payment inform of Salary, Remuneration, Interest, Bonus or Commission at the time of credit of such sum to the account of the partner (including the capital account) or at the time of payment thereof, whichever is earlier @ 10%
• The TDS has to be deducted if the aggregate of such sums credited or payment made exceed Rs 20,000 during the financial year.
• This amendment would apply in relation to AY 2025-26 and thereafter.

D. Amended TDS Rate

E. Section 206C (1F)- TCS on Luxury Goods

• The Budget has levied TCS (tax collected at source) of 1% on notified luxury goods whose value exceed Rs 10 lakh.
• This amendment will be applicable from 1st of January, 2025.

F. Section 206C- Claiming Credit for TCS of Minor in hands of Parents

• Now parents can claim TCS of the Minor Children only if its income is also clubbed in the hands of Parents.
• This amendment will be applicable from 1st of January, 2025.

G. Section 197/206- Lower Tax Deduction Or Collection

• The now assessee can apply for lower tax deduction certificate for section 194Q or lower collection certificate for section 206C(1H).
• This amendment will be applicable from 1st of October, 2024.

H. Section 200/ 206C(3B)- Time limit to file correction statement in respect of TDS/ TCS Returns

• No correction can be made in the returns after the expiry of six years from the end of the financial year in which such returns are filed.
• This amendment would apply in relation to AY 2025-26 and thereafter.

I. Section 206C(7)- Interest on Late Deposit of TCS

• Interest on late deposit of TCS has been increased from 1% to 1.5% Per Month.
• This amendment would apply in relation to AY 2025-26 and thereafter.

J. Section 201 / 206C(7A)- Reducing time limitation for orders deeming any person to be in default

• The time limit given for deeming any person to be in default has been reduced from 7 years to 6 years from the end of the financial year in which payment is made or credit is given or tax was collectible or 2 years from the end of the financial year in which the correction statement is delivered, whichever is later
• This amendment would apply in relation to AY 2025-26 and thereafter.

K. Section 271H- Penalty for failure to furnish statements

• The time limit has been reduced from 1 year to 1 month for non levying the penalty if the person proves that after paying TDS/ TCS along with fees and interest to the credit of the Central Government, he has filed the TDS/TCS statement before the expiry of period of one month from the time prescribed for furnishing such statement.
• This amendment would apply in relation to AY 2025-26 and thereafter.

L. Section 276B- Failure to pay Tax Deducted to the Government

• Section 276B of the Act provides for prosecution in case of failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B. The provisions of the said section state that, inter-alia, if a person fails to pay to the credit of the Central Government, the tax deducted at source by him as required by or under the provisions of Chapter XVII-B, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.
• Provided that the provisions of this section shall not apply if the payment of tax deducted in respect of a quarter has been made to the credit of the Central Government at any time on or before the time prescribed for filing the statement of such quarter under sub-section (3) of section 200 of the Act.
• This amendment will be applicable from 1st of October, 2024.

11. OTHER MATTERS

A. Section 198- Tax Deducted is Income Received

• All the sums deducted in accordance with the provisions of Chapter XVII-B and income tax paid outside India by way of deduction, in respect of which an assessee is allowed a credit against the tax payable under the Act, are for the purpose of computing the income of the assessee, deemed to be income received in India.
• This amendment would apply in relation to AY 2025-26 and thereafter.

B. Section 230 (1A)- Tax Clearance Certificate

• The tax clearance certificate under Section 230(1A) of the Act, may be required to be obtained by persons domiciled in India only in the following circumstances:
• i. where the person is involved in serious financial irregularities and his presence is necessary in investigation of cases under the Income-tax Act or the Wealth-tax Act and it is likely that a tax demand will be raised against him, or
• ii. where the person has direct tax arrears exceeding Rs. 10 lakh outstanding against him which have not been stayed by any authority
• This amendment will be applicable from 1st of October, 2024.

C. Section 245- Withholding of Refunds

• Section 158BFA of the Act is an interest and penalty provision under Chapter XIV-B of the Act for imposition of penalty on undisclosed income for the block period in a case where search has been initiated under section 132 of the Act. However, as the reference to the same has not been inserted in sub-section (1) of section 253 of the Act, an aggrieved assessee cannot appeal against such penalty orders passed by Commissioner (Appeals). Accordingly, now clause (a) of subsection (1) of section 253 is amended to include the reference of section 158BFA therein which means now appeal can be filled in such cases also.
• This amendment will be applicable from 1st of October, 2024.

D. Section 271GC- Penalty for Failure to Submit Statement u/s 285

• If any person who is required to furnish statement under section 285, fails to do so within the period prescribed under that section, the Assessing Officer may direct that such person shall pay, by way of penalty, a sum of--

(a) one thousand rupees for every day for which the failure

continues, if the period of failure does not exceed three months; or

(b) one lakh rupees in any other case.".

• This amendment would apply in relation to AY 2025-26 and thereafter.