Major Income Tax Changes in 2024: What You Should Know for Filing ITR in 2025?

Significant changes to income tax laws were implemented in 2024, affecting how taxpayers will file their Income Tax Returns (ITRs) in 2025. Following the general elections earlier this year, the government implemented major changes to income tax laws, many of which are now in force for the financial year 2024-25.

These changes, which range from revamped tax slabs to new rules for capital gains and TDS, are expected to influence how you plan, save, and file your Income Tax Return (ITR) in 2025.

Are you confused about how these changes affect you? Here’s a quick overview of the ten most significant changes and their implications on your finances, so you can plan smarter and save more effectively!

Revised Income Tax Slabs Under New Tax Regime

The new tax regime includes revised income tax slabs that benefit individual taxpayers. Under the new structure, income up to Rs.3,00,000 is tax exempted, while income between Rs.3,00,001 and Rs.7,00,000 are taxed at 5%. Income between Rs.7,00,001 and Rs.10,00,000 is taxed at 10%, while the following category, Rs.10,00,001 to Rs.12,00,000 is taxed at 15%. Earnings between Rs.12,00,001 and Rs.15,00,000 are taxed at 20%, while income exceeding Rs.15,00,000 is taxed at 30%.

These changes allow taxpayers who opt for the new regime to save up to Rs.17,500 each year.

Standard Deduction Limit Increased

The standard deduction limit for individuals under the new tax regime has been increased from Rs 50,000 to Rs 75,000. Family pensioners would also enjoy an increase to Rs.25,000 from Rs.15,000. The old tax regime maintained the existing limit of Rs 50,000 for salaried individuals and Rs.15,000 for family pensioners.

This rise in deductions under the new regime significantly reduces taxable income, making it more appealing to a wider variety of taxpayers.

Increased NPS Deduction for Employees Contribution

Individuals can now deduct up to 14% of their basic pay for employer contributions to the National Pension System (NPS), up from 10% previously.

Contributions of more than Rs.7.5 lakh to EPF, NPS, and superannuation funds, on the other hand, remain taxable, providing balanced benefits within stipulated limitations.

Capital Gains Taxation Simplified

Capital gains taxation has been eased by the new structure. Short-term capital gains (STCG) on stocks and equity-oriented funds are now taxed at 20%, up from 15%, while long-term capital gains (LTCG) on all assets are taxed evenly at 12.5%. Equity and equity-oriented funds continue to get an annual exemption of up to Rs.1.25 lakh.

However, the changes simplify tax calculations while limiting indexation benefits for specific assets.

TDS Rates Rationalised

To decrease complexity, TDS (tax deducted at source) rates have been rationalised for a variety of payments, including insurance commissions (2%), rent (2%), and e-commerce payments (0.1%).

This rationalisation reduces upfront tax deductions, allowing taxpayers to keep more of their money.

Claiming TDS and TCS Credit against Salary

Salaried individuals can now offset TDS or TCS (tax collected at source) deductions from other sources of income against TDS on their salary, reducing cash flow difficulties and increasing monthly take-home pay.

TDS on Property Sales Modified

For property sales surpassing Rs.50 lakh, TDS is now levied on the total sale value, regardless of individual sellers’ shares, improving compliance and avoiding TDS evasion.

Vivad Se Vishwas Scheme 2.0

The Vivad Se Vishwas Scheme 2.0 has been revived to help settle existing tax disputes peacefully. This gives taxpayers the option to resolve their claims efficiently, decreasing uncertainty.

AADHAAR Mandatory for ITR and PAN Applications

Individuals would no longer be able to file ITRs or register for PAN using their Aadhaar enrolment numbers beginning in October 2024. Aadhaar will be required for these processes. Those without Aadhaar will now find it impossible to complete these activities.

Time Limit for Old ITR Revisions Reduced

The time limit for revisiting previous ITRs has been reduced to five years in situations involving income escaping assessments of more than Rs.50 lakh. This adjustment is intended to reduce lengthy litigation and provide greater confidence to taxpayers.

The tax reforms in 2024 are intended to simplify processes, improve compliance, and provide select benefits. Taxpayers should compare previous and new regimes and stay informed to maximise savings while meeting their duties. The changing tax landscape highlights the importance of cautious planning and early action.