India: Major Income Tax Changes by 2024

January 14, 2025

In 2024, India implemented significant reforms to its income tax system, affecting both individuals and businesses.  

Revision of tax structures  

The 2024 budget introduced new tax rates for individuals:  

  • Annual income between ₹300,000 and ₹700,000 is now taxed at 5%.  
  • Income between ₹700,000 and ₹1,000,000 is taxed at 10%.  
  • Income between ₹1,000,000 and ₹1,200,000 is taxed at 15%.  
  • Income between ₹1,200,000 and ₹1,500,000 is taxed at 20%.  
  • Income above ₹1,500,000 is taxed at 30%.  

In addition, the standard deduction for salaried employees increased from ₹50,000 to ₹75,000.  

Elimination of the ‘Angel Tax’ 

The government abolished the “angel tax,” which taxed investments in unlisted companies that exceeded the market value of their shares, especially benefiting startups and early-stage companies.  

Capital Gains Tax Modifications  

Adjustments were made to the rates for capital gains:  

  • Short-term capital gains are now taxed at 20%.  
  • Long-term capital gains are taxed at 12.5%, with the exemption limit increased to ₹125,000.  

Reduction in Withholding Tax Rates (TDS)

TDS rates for various payments were reduced:  

  • Insurance commissions, life insurance policy payments and rentals decreased from 5% to 2%.  
  • Payments from e-commerce operators to participants decreased from 1% to 0.1%.  

Transfer Pricing Considerations  

Although the reforms do not directly address Transfer Pricing, it is essential that multinationals in India review their policies to ensure compliance with current tax regulations and avoid potential penalties.  

Frequently Asked Questions  

  1. How do these reforms affect individual taxpayers?  The new rates and deductions seek to increase disposable income and stimulate consumption.  
  2. What does the elimination of the ‘angel tax’ imply?  Facilitates investment in startups by eliminating levies on investments that exceed the market value of the stock.  
  3. How do the new TDS rates impact businesses?  They simplify tax compliance and reduce the tax burden on certain payments.  

To understand how these reforms can affect your business and ensure compliance with Indian tax regulations, contact us at TPC Group. Our team of experts is ready to provide you with personalized advice.

 

Source: Business Today