Income Tax Rules: Let us understand in simple language what these changes related to income tax mean and how it will affect your ITR filing (ITR Filing 2025).
Income Tax Rules: In July this year, many new income tax rules were introduced in the Union Budget 2024. These changes have come into effect from the financial year 2024-25 and will affect the income tax return filing in 2025. The government has taken several steps to provide relief to taxpayers and simplify the tax process. These include changes in tax slabs, new provisions for exemptions and deductions, and rules promoting digital payments. Let us understand in simple language what these changes mean and how it will affect your ITR filing (ITR Filing 2025).
These 10 income tax rules will affect your ITR filing in 2025
1. New income tax slabs
The government has changed the income tax slabs under the new tax regime. The changes made in the tax slab will help people save more income tax for the financial year 2024-25. With the changes made in the income tax slabs under the new tax system, taxpayers will be able to save income tax up to Rs 17,500 in a financial year.
2. Standard deduction limit increased
Along with the changes in the income tax slabs, the government has also increased the standard deduction limit under the new tax system. If a person opts for the new tax regime for the financial year 2024-25, he can now claim a standard deduction of Rs 75,000 instead of the earlier Rs 50,000. Under the new tax system, the limit of standard deduction for family pensioners has been increased from Rs 15,000 to Rs 25,000. No change has been made in the standard deduction limit of the old tax system.
3. More deduction on employer’s contribution in NPS
In the new tax system, the deduction limit for employee’s contribution to NPS (National Pension System) has been increased. Earlier the deduction limit was 10% which has now been increased to 14%.
4. New tax rates for LTCG and STCG
The government has changed the rules of capital gains taxation from the financial year 2024-25. To simplify the capital gains taxation regime, tax rates on LTCG (long-term capital gains) and STCG (short-term capital gains) have been changed. Short-term capital gains (STCG) on equity and equity-oriented mutual funds will be taxed at 20%. Whereas earlier it was 15% i.e. it has been increased by 5%.
Long-term capital gains (LTCG) from any asset will now be taxed at 12.5%. Whereas earlier it was different for different assets. Tax exemption will be given on income up to Rs 1.25 lakh on LTCG on equity and equity oriented mutual funds. Whereas earlier it was Rs 1 lakh.
5. Change in holding period for capital gains taxation
The government has also changed the time period of capital assets to categorize capital gains as long term or short term capital gains. According to the new rules, there will be only two holding periods for capital assets, which will determine whether the capital gain is short term or long term. For all listed securities, if the holding period is 12 months, then the gain will be considered as long term capital gain. On the other hand, the holding period for long term capital gain for all non-listed securities will be 24 months.
6. TCS credit allowed to other person
Understanding the needs of the middle class, the government has allowed people other than the collector (from whom tax is collected (TCS)) to claim TCS credit in place of the collectee. This new provision will help those parents who pay tuition fees of children studying abroad but are unable to claim TCS credit on their behalf. This new rule will come into effect from January 1, 2025.
7. TDS on RBI floating rate bonds
The government has included RBI floating rate bonds in the list of financial instruments on which returns are subject to TDS. If the interest earned on RBI floating rate bonds is more than Rs 10,000 per month, then TDS will be deducted.
8. TCS on luxury goods
People buying luxury goods will now have to spend more as they will also have to pay TCS (Tax collected at source). TCS will be levied on goods worth more than Rs 10 lakh. This new law will come into effect from January 1, 2025. However, the government has not yet given information about the list of luxury goods and how TCS will be implemented.
9. Change in TDS on house sale
The rules for TDS on property sale have been changed. According to the amendment, if the total payment is more than Rs 50 lakh, then TDS on property sale should be deducted from the total payment made to the seller, even if the share of each seller is less than Rs 50 lakh. The new change has come into effect from October 1, 2024.
10. Vivaad se Vishwas Scheme 2.0
The government has launched the ‘Vivad se Vishwas’ scheme to end old income tax disputes of taxpayers. The aim of which is to settle old income tax cases quickly. This scheme has come into effect from October 1, 2024.
