Finance Act 2024 in India

• Act Details:
  • Title: Finance Act, 2024
  • Act Number: Act 8 of 2024
  • Published in: Gazette of India on 16 February 2024.
  • Commencement Status: The Act has not commenced as of its publication date.
  • Purpose: The Act is designed to continue the existing rates of income tax for the financial year 2024-2025, provide certain reliefs to taxpayers, and introduce amendments to various tax-related laws.

Chapter I: Preliminary

• 1. Short Title and Commencement:
  • 1(1): The official title of the Act is the “Finance Act, 2024”.
  • 1(2):
    • (a): Sections 2 to 10 of the Act are scheduled to come into force on 1 April 2024, marking the beginning of the new financial year.
    • (b): Sections 11 to 13 will be activated on a date specified by the Central Government through a notification in the Official Gazette. This allows the government flexibility in implementing these sections.

Chapter II: Rates of Income-tax

• 2. Income-tax:
  • General Provisions:
    • The Act continues the provisions from the Finance Act, 2023, with modifications for the financial year 2024-2025, particularly focusing on the rates and administration of income tax.
  • Specific Modifications:
    • (a) Section 2:
      • (i) Sub-section (1): The year reference is updated from 2023 to 2024 to align with the new financial year.
      • (ii) Sub-section (2):
        • Income and Agricultural Income Aggregation:
          • For individuals with net agricultural income exceeding ₹5,000 and total income above ₹2.5 lakhs, the tax calculation method is specified.
          • The net agricultural income is considered for tax computation purposes after accounting for a standard exemption of ₹2.5 lakhs.
        • Senior Citizen Provisions:
          • Individuals aged 60-79 years receive a higher exemption limit of ₹3 lakhs.
          • Individuals aged 80 years and above receive an exemption limit of ₹5 lakhs.
        • Income Tax Computation:
          • Aggregated income is taxed at rates specified in Paragraph A or under section 115BAC of the Income-tax Act.
          • Provisions also adjust tax computations for specific cases, like those involving surcharge or under special tax regimes.
      • (iii) Sub-section (3):
        • Special Cases:
          • Tax rates are determined based on specific chapters of the Income-tax Act, such as Chapter XII or section 115JB.
          • These provisions apply to cases involving minimum alternate tax (MAT), taxation of specific types of income, or entities like cooperative societies.
        • Surcharge:
          • A surcharge is added to the tax calculated under sections like 111A, 112, or 112A, with exceptions for domestic companies and other entities under specified sections.
      • (iv) Sub-section (9):
        • Amendments and Clarifications:
          • Language adjustments clarify the application of provisions to “co-operative societies resident in India”.
          • Technical corrections renumber certain clauses and adjust language for consistency.
      • (v) Sub-section (10):
        • Language Modifications:
          • Changes ensure consistent wording across different tax determination scenarios.
      • (vi) Sub-section (13):
        • Updates the reference year from 2023 to 2024 for the applicable financial year.
    • (b) First Schedule:
      • Part I: Rates of Income-tax:
        • Paragraph A:
          • Individuals under 60 years:
            • Income up to ₹2.5 lakhs: Exempt from income tax.
            • Income between ₹2.5 lakhs and ₹5 lakhs: Taxed at 5%.
            • Income between ₹5 lakhs and ₹10 lakhs: Taxed at 20%, with a standard deduction of ₹12,500.
            • Income above ₹10 lakhs: Taxed at 30%, with a standard deduction of ₹1,12,500.
          • Senior Citizens (60-80 years):
            • Income up to ₹3 lakhs: Exempt from income tax.
            • Income between ₹3 lakhs and ₹5 lakhs: Taxed at 5%.
            • Income between ₹5 lakhs and ₹10 lakhs: Taxed at 20%, with a deduction of ₹10,000.
            • Income above ₹10 lakhs: Taxed at 30%, with a deduction of ₹1,10,000.
          • Super Senior Citizens (80+ years):
            • Income up to ₹5 lakhs: Exempt from income tax.
            • Income between ₹5 lakhs and ₹10 lakhs: Taxed at 20%.
            • Income above ₹10 lakhs: Taxed at 30%, with a deduction of ₹1 lakh.
          • Surcharge Rates:
            • Applicable based on total income exceeding ₹50 lakhs, with rates ranging from 10% to 37% depending on the income bracket.
        • Paragraph B: Co-operative Societies:
          • Income up to ₹10,000: Taxed at 10%.
          • Income between ₹10,000 and ₹20,000: Taxed at 20%, with a ₹1,000 deduction.
          • Income above ₹20,000: Taxed at 30%, with a ₹3,000 deduction.
          • Surcharge: Applied at 7% for incomes exceeding ₹1 crore and at 12% for incomes exceeding ₹10 crores.
        • Paragraph C: Firms:
          • Flat tax rate of 30% on total income.
          • Surcharge: 12% on incomes exceeding ₹1 crore, with a cap ensuring the surcharge does not excessively increase the tax liability.
        • Paragraph D: Local Authorities:
          • Flat tax rate of 30% on total income.
          • Surcharge: Similar to firms, 12% on incomes exceeding ₹1 crore.
        • Paragraph E: Companies:
          • Domestic Companies:
            • Companies with a turnover of up to ₹400 crores: Taxed at 25%.
            • Other companies: Taxed at 30%.
          • Other Companies:
            • Income up to ₹10,000: Taxed at 10%.
            • Income between ₹10,000 and ₹20,000: Taxed at 20%, with a ₹1,000 deduction.
            • Income above ₹20,000: Taxed at 40%.
          • Surcharge:
            • 7% on domestic companies with incomes exceeding ₹1 crore but below ₹10 crores.
            • 12% on domestic companies with incomes exceeding ₹10 crores.
            • 2% on other companies with incomes exceeding ₹1 crore but below ₹10 crores.
            • 5% on other companies with incomes exceeding ₹10 crores.
      • Part II: Rates for Deduction of Tax at Source (TDS):
        • Resident Individuals:
          • Interest on non-security investments: 10%.
          • Winnings from lotteries, puzzles, etc.: 30%.
          • Insurance commission: 5%.
          • Other types of income: 10%.
        • Non-Residents:
          • Non-resident Indians:
            • Investment income: 20%.
            • Long-term capital gains: 10%-20%.
            • Short-term capital gains under section 111A: 15%.
            • Interest from Government/Indian concern on foreign currency debt: 20%.
            • Royalties and technical fees: 20%.
          • Other Non-Residents:
            • Interest from foreign currency debt: 20%.
            • Royalties and technical fees: 20%.
            • Winnings from lotteries, puzzles, etc.: 30%.
      • Part III: Specific Amendments:
        • Adjustments in Paragraph E of Part III, updating the financial year reference from “2021-2022” to “2022-2023”.
      • Part IV: Set-off of Agricultural Losses:
        • Rule 8:
          • (1) & (2): Procedures for setting off agricultural income losses from specific years against the income of the relevant assessment year.
          • Losses from prior years can be carried forward and set off against current year agricultural income under specified conditions.
          • The rule specifies the years and conditions under which these losses can be applied.
          • (3): Clarification that only the person who incurred the loss can claim this set-off unless the succession is by inheritance.
          • (4): Losses must be determined by the Assessing Officer under the rules from previous Finance Acts (2016-2023) to be eligible for set-off.

Chapter III: Direct Taxes

• 3. Amendment of Section 10:
  • Clause (4D) Explanation:
    • Adjusts the applicability year from “2024” to “2025” in specific clauses, ensuring that provisions align with the updated timeline for financial benefits.
  • Clause (4F): Extends applicability to “2025” for certain tax exemptions.
  • Clause (23FE): Adjusts the year reference from “2024” to “2025” for income exclusions under specific sub-clauses.
• 4. Amendment of Section 80-IAC:
  • Explanation Clause (ii):
    • Updates the benefit timeline for startups eligible under section 80-IAC, extending it to the year “2025”.
• 5. Amendment of Section 80LA:
  • Sub-section (2) Clause (d):
    • Extends the deadline for claiming tax deductions under section 80LA for units operating in International Financial Services Centres (IFSC) to “2025”.
• 6. Amendment of Section 90CA:
  • Sub-section (9) Proviso:
    • Adjusts the reference year from “2024” to “2025” for compliance with arm’s length pricing requirements in transfer pricing cases.
• 7. Amendment of Section 144C:
  • Sub-section (14C) Proviso:
    • Extends the time limit for completing assessments involving Dispute Resolution Panels from “2024” to “2025”.

• 8. Amendment of Section 206C:
  • Sub-section (1G):
    • (a): Reduces the tax collection at source (TCS) rate from 20% to 5% for specified transactions, retroactively effective from 1 July 2023.
    • (b): Removes the specific exemption for payments related to education or medical treatment.
    • (c): Starting 1 October 2023, restores the 20% TCS rate for certain transactions, excluding education and medical payments.
    • (d): Introduces a new provision requiring a 20% TCS on overseas tour package purchases exceeding ₹7 lakhs annually.
    • (e): Adds a proviso ensuring that TCS for transactions between 1 July and 1 October 2023 is calculated based on the rules as they stood on 1 April 2023.
• 9. Amendment of Section 253:
  • Sub-section (9) Proviso:
    • Updates the compliance year from “2024” to “2025” for certain appeals against tribunal decisions.
• 10. Amendment of Section 255:
  • Sub-section (8) Proviso:
    • Adjusts the reference year from “2024” to “2025” for decisions made by the Appellate Tribunal.

Chapter IV: Indirect Taxes

• 11. Amendment of Section 2 (Central Goods and Services Tax Act, 2017):
  • Clause (61):
    • Redefines “Input Service Distributor” (ISD) to include offices of suppliers receiving tax invoices for distinct persons as specified in section 25 of the CGST Act.
    • The ISD is responsible for distributing the input tax credit (ITC) received on behalf of distinct persons.
• 12. Substitution of Section 20:
  • New Section 20:
    • Manner of Distribution of Credit by ISD:
      • ISDs must be registered under clause (viii) of section 24 and must distribute ITC in the manner prescribed by law.
      • The credit of central tax or integrated tax is to be distributed based on the invoice details received by the ISD.
      • Distribution is to occur in a manner and timeframe prescribed by the GST authorities, with ITC distributed as central or integrated tax, depending on the nature of the original tax credit.
• 13. Insertion of New Section 122A:
  • Penalty for Failure to Register Machines:
    • (1): Imposes a penalty of ₹1 lakh per unregistered machine used in the manufacturing of goods when special registration procedures are notified under section 148.
    • (2): In addition to monetary penalties, unregistered machines are subject to seizure and confiscation.
    • Proviso:
      • Machines will not be confiscated if the penalty is paid and registration is completed within three days of receiving the penalty order.

Also Read:

Union Budget 2024 Highlights & Announcements

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