Every month, there are changes in various regulations, and next month will see some changes as well. Starting from October, several regulations related to taxes will be updated. Major changes involving the Aadhaar Card and Income Tax are set to take effect on October 1. These changes were announced by Finance Minister Nirmala Sitharaman in the Union Budget 2024.
In the Budget 2024, Nirmala Sitharaman announced some modifications concerning Income Tax. Some of these changes are already effective, while others will come into effect on October 1. The changes include updates regarding the Aadhaar card, Securities Transaction Tax (STT), TDS rates, and the Direct Tax Dispute Resolution Scheme 2024.
1. Direct Tax Dispute Resolution Scheme
The Direct Tax Dispute Resolution Scheme will be effective from October 1, 2024. This scheme provides an opportunity to resolve pending tax disputes. Initially introduced in 2020, it is related to resolving pending tax appeals before high courts or the Supreme Court. Under this scheme, taxpayers with disputes regarding tax, interest, penalties, or fees can settle their issues.
The settlement amount under this scheme depends on the timing of payment. Taxpayers opting for settlement between October 1, 2024, and December 31, 2024, must pay either the full disputed tax amount or 25% of the disputed interest, penalties, or fees. However, those wishing to settle after December 31, 2024, will need to pay 110% of the disputed tax amount or 30% of the interest, penalties, or fees.
2. Aadhaar Card
The Budget 2024 proposed to discontinue the provision allowing the use of Aadhaar enrollment ID instead of the Aadhaar number. This decision aims to curb the misuse and duplication of PAN (Permanent Account Number). From October 1, 2024, individuals will no longer be able to mention their Aadhaar enrollment ID in their PAN application form and income tax returns.
According to the Budget, Section 139AA of the Act mandates the mention of Aadhaar numbers in PAN applications and income tax returns for eligible individuals since July 1, 2017.
Also Read: What is a Blue Aadhaar Card? Where is It Used, and Who can Apply for It? Learn All the Details
3. Securities Transaction Tax (STT)
The Securities Transaction Tax (STT) applicable to futures and options (F&O) trading will increase from October 1, 2024. Specifically, the tax rates for equity futures and options will rise to 0.02% and 0.1%, respectively. Additionally, tax on income from share buybacks will now be levied based on the beneficiaries’ taxable income. The STT premium on options sales will also increase from 0.0625% to 0.1%.
4. Floating TDS Rates
The Budget 2024 included a significant update regarding Tax Deduction at Source (TDS), particularly concerning bonds issued by central and state governments, including floating rate bonds. Effective from October 1, 2024, a TDS of 10% will apply to these bonds. Furthermore, new TDS regulations will include floating rate savings bonds. TDS will not be deducted if the revenue received in a year is less than ₹10,000; TDS will only be applied when income exceeds this threshold.
5. TDS Rates
The TDS rates for payments under Sections 194DA, 194H, 194-IB, and 194M have been reduced. The rates have been decreased from 5% to 2% for these sections. Additionally, the TDS rate for e-commerce operators has been reduced from 1% to 0.1%.
- Section 194DA: Payments for life insurance policies
- Section 194G: Commission on lottery ticket sales
- Section 194H: Commission or brokerage
- Section 194-IB: Payments related to rent by Hindu Undivided Families (HUF)
- Section 194M: Payments concerning specific amounts by designated individuals or HUF
- Section 194F: Related to mutual fund unit repurchases or payments concerning UTI, expected to come into effect from October 1, 2024.
6. Share Buyback
A new rule concerning the taxation of share buybacks will be implemented from October 1. Shareholders will be responsible for paying tax on income from buybacks, similar to the taxation applicable to dividends. This change will transfer the tax burden from companies to shareholders, significantly impacting buyback strategies.