Key changes to income tax from October 1: what you need to know

New Delhi: The Union Budget 2024, presented by Finance Minister Nirmala Sitharaman, introduced several changes in income tax. Some of which will come into effect from October 1, 2024. These changes include revisions to the Aadhaar card policy, Securities Transactions Tax (STT), Tax Deducted at Source (TDS) and a modified version of the Vivad Se Vishwas Scheme. According to the official announcement, the changes are aimed at simplifying tax procedures and addressing issues such as misuse of PAN. Here’s a breakdown of what will change:

Vivad Se Vishwas Scheme 2024

Starting October 1, taxpayers can resolve ongoing tax disputes under the Vivad Se Vishwas Scheme. This scheme, first introduced in 2020, was updated in the 2024 Budget to cover disputes pending as of 22 July 2024. It will help taxpayers resolve disputes relating to tax, interest, penalties and fees pending before appeal bodies , higher courts, or the Supreme Court.

Changes in Aadhaar card rules

Starting October 1, 2024, individuals will no longer be able to use their Aadhaar enrollment ID instead of an Aadhaar number while applying for a PAN card or filing income tax returns. This change is intended to prevent misuse of PAN and ensure greater accuracy. Use of Aadhaar for tax-related matters is mandatory from July 1, 2017, under Section 139AA of the Income Tax Act.

Increase in Securities Transaction Tax (STT)

The STT on futures and options (F&O) trading will increase from October. The tax on futures trading will increase to 0.02 percent, while the tax on options trading will increase to 0.1 percent. Additionally, the option sales tax will increase from 0.0625 percent to 0.1 percent. Income from share buybacks will also be taxed based on the shareholder’s taxable income.

Floating TDS rate on bonds

A new TDS rate of 10 per cent on income from central and state government bonds, including floating rate bonds, will be introduced from October 1. However, no TDS will be deducted if the total income from these bonds is less than Rs 10,000 in a financial year. The new rules also cover Floating Rate Savings Bonds.

Lower TDS rates for some payments

The Budget has reduced TDS rates for certain payments. Payments under sections 19DA, 194H, 194-IB and 194M will now be subject to a lower TDS rate of 2 per cent. It is lower than the previous rate of 5 percent. For e-commerce transactions, the TDS rate has been reduced from 1 per cent to 0.1 per cent.

Taxation of share buybacks

A new rule that will take effect on October 1 will shift the responsibility for paying taxes on companies’ share buybacks to shareholders. Under this rule, shareholders will pay taxes on the buyback proceeds, similar to how dividends are taxed. This will likely affect companies’ buyback strategies and how they distribute returns to shareholders.