The Central Government is set to implement several significant changes in the Income Tax rules starting 1st October 2024. These changes, announced in the Union Budget on 23rd July, are expected to impact a variety of taxpayers, including retail investors, bondholders, and those involved in share buybacks. Here’s an overview of the upcoming changes so that you’re prepared.
1. Higher Securities Transaction Tax (STT) on F&O Trades
From 1st October 2024, the Securities Transaction Tax (STT) on Futures and Options (F&O) trades will increase. Finance Minister Nirmala Sitharaman introduced this hike in the Union Budget with the aim of discouraging retail investors from excessive F&O trading.
The revised STT rates will be:
- Options Premium: 0.1% STT (up from current rates)
- Futures Contracts: 0.02% STT
This move aims to curb speculative trading by retail investors in the derivatives market.
2. TDS on Government Bonds’ Interest
Starting 1st October, Tax Deducted at Source (TDS) at a rate of 10% will apply to interest earned on certain government bonds, including Floating Rate Bonds. However, a ₹10,000 limit has been set, meaning TDS will only apply if the interest income from these bonds exceeds ₹10,000 in a financial year. If the interest is below this threshold, no TDS will be deducted.
3. New Rules for Share Buyback Tax
The new tax rules for share buybacks will also come into effect from 1st October 2024. Under these rules, investors who participate in share buybacks will now have to pay capital gains tax on their earnings. Previously, capital gains from share buybacks were tax-exempt for investors, but this exemption will no longer be available after the rule change.
4. No More Aadhaar Enrollment for PAN Application
From October, taxpayers will no longer be required to submit their Aadhaar enrollment ID when applying for a PAN card or filing an ITR (Income Tax Return). This will simplify the application and filing process for individuals who are not yet enrolled in the Aadhaar system.
5. Vishwas Scheme 2024: A Relief for Pending Tax Cases
The Vishwas Scheme 2024, expected to launch in October, will allow taxpayers with pending tax disputes to settle their cases with reduced penalties. This scheme is designed to help clear the backlog of tax-related disputes and offers an easier, more affordable resolution option for taxpayers.
Key Changes Starting 1st October 2024:
| Change | Current Rule | New Rule from 1st October 2024 |
|---|---|---|
| Securities Transaction Tax (STT) | Lower STT on F&O trades | Increased to 0.1% on options and 0.02% on futures |
| TDS on Government Bonds | No TDS on government bonds’ interest | 10% TDS on interest exceeding ₹10,000 annually |
| Share Buyback Tax | Capital gains exempt from tax | Capital gains tax to be paid on share buybacks |
| Aadhaar for PAN/ITR | Aadhaar enrollment ID required | Aadhaar enrollment ID no longer needed |
| Vishwas Scheme 2024 | No such scheme | Allows settlement of pending tax cases with low penalties |
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