Finance Minister Nirmala Sitharaman Announces New Tax Reforms for 2024-25
Finance Minister Nirmala Sitharaman has announced a significant set of income-tax reforms for the fiscal year 2024-25. These reforms aim to simplify tax laws, promote compliance, and foster economic growth.
Key Changes in Tax Slabs
The new tax slab will now have nil tax up to an income of Rs 3 lakh. Income between Rs 3-7 lakh will attract a tax rate of 5 per cent. Income between Rs 7-10 lakh will be taxed at 10 per cent. Income between Rs 10-12 lakh will be taxed at 15 per cent. Tax on income between 12-15 lakh will remain the same at 20 per cent, and income above Rs 15 lakh will remain constant at 30 per cent.
Increased Deductions
The standard deduction has been increased from Rs 50,000 to Rs 75,000. The deduction from family pension has been increased from Rs 15,000 to Rs 25,000. The employer’s contribution to the pension scheme under section 80CCD has been increased from 10 per cent to 14 per cent of the employee’s salary.
Additional Measures
Additional measures include merging tax exemption regimes for charities, reducing the TDS rate for e-commerce operators to 0.1 per cent, and allowing TCS credit against TDS deducted on salaries. The FM has also announced simplification of reopening and reassessment procedures, rationalized SOPs for TDS defaults, and issued compounding guidelines. A simpler tax regime is introduced for foreign shipping companies operating domestic cruises in the country. Income generated from buybacks will now be taxed, and the penalty for non-reporting of movable assets valued at Rs 20 lakhs is being removed. The equalization levy, a tax on digital transactions, is withdrawn.
Doubts Revealed
Finance Minister -: The Finance Minister is a person in the government who is responsible for managing the country’s money, including taxes and spending. In India, this role is currently held by Nirmala Sitharaman.
Nirmala Sitharaman -: Nirmala Sitharaman is an Indian politician who is the current Finance Minister of India. She is responsible for making decisions about the country’s finances.
Tax Reforms -: Tax reforms are changes made to the tax system to make it better. These changes can include new rules about how much tax people have to pay and how they pay it.
2024-25 -: 2024-25 refers to the financial year that starts in 2024 and ends in 2025. In India, a financial year is a period used for accounting and tax purposes.
Income-tax -: Income-tax is the money that people and businesses have to pay to the government based on how much money they earn.
Tax slabs -: Tax slabs are different levels of income that are taxed at different rates. For example, people who earn more money might have to pay a higher percentage of their income as tax.
Standard deductions -: Standard deductions are fixed amounts that people can subtract from their total income before calculating how much tax they owe. This helps reduce the amount of income that is taxed.
Pension scheme contributions -: Pension scheme contributions are amounts of money that people save for their retirement. The government can encourage people to save more by giving them tax benefits for these contributions.
Income Tax Act -: The Income Tax Act is a law in India that contains all the rules about how income tax is collected and managed. The government reviews and updates this law to keep it fair and effective.
Tax exemption regimes for charities -: Tax exemption regimes for charities are rules that allow charitable organizations to not pay taxes on the money they receive. This helps them use more of their funds for good causes.
TDS rates for e-commerce -: TDS stands for Tax Deducted at Source. TDS rates for e-commerce are the percentages of money that online businesses have to deduct as tax before paying sellers. Lowering these rates means sellers get more money upfront.
Tax administration procedures -: Tax administration procedures are the steps and processes that the government uses to collect and manage taxes. Simplifying these procedures makes it easier for people to pay their taxes correctly.
