The Finance Act in 2024

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.