Starting October 1, 2024, Key Financial Rule Changes several significant financial changes will come into effect, impacting various aspects of taxation, government bonds, and the use of Aadhaar in PAN applications. These updates, as outlined in the Union Budget 2024, were passed in the Finance Bill and aim to streamline tax processes and reduce misuse of government-issued identification. Let’s delve into the key financial rule changes that will impact both individuals and businesses.
Key financial rule changes that will impact both individuals and businesses:-
Aadhaar and PAN Card Changes
One of the most notable key financial rule changes that will impact both individuals and businesses. starting from October 1, 2024, is the modification to the use of Aadhaar in PAN card applications. To prevent PAN card misuse and duplication, the use of an Aadhaar Enrollment ID, previously allowed in place of an Aadhaar number, will no longer be applicable. Similarly, Aadhaar details will no longer be required for Income Tax Return (ITR) filings or PAN card applications. This change is intended to strengthen the verification process and reduce the risk of fraudulent PAN card activities, which have been a concern for some time.
With the removal of Aadhaar Enrollment ID as a valid identifier, individuals applying for PAN cards will need to use alternative, more secure identification methods. This shift is seen as a move to tighten regulatory measures and ensure that PAN cards are only issued to verified individuals.
Securities Transaction Tax (STT) on Futures and Options (F&O)
As part of the 2024 budget, the Securities Transaction Tax (STT) on Futures and Options (F&O) transactions has been increased, a change that will come into effect on October 1. The STT on futures contracts will now be set at 0.02%, while options contracts will see a rate of 0.1%. This marks a significant increase for traders and investors in the F&O segment, making trading in these instruments more expensive.
Additionally, income earned from share buybacks will now be taxed at the beneficiary or shareholder level, aligning the taxation of buybacks with that of dividends. This means that shareholders will bear the tax burden, which may reduce the overall net returns for investors involved in share buybacks. The acquisition cost of the shares will be factored into the capital gains calculations, making the tax calculation more detailed and precise.
Tax Deducted at Source (TDS) on Floating Rate Bonds
A crucial change affecting government bonds is the introduction of a 10% Tax Deducted at Source (TDS) on certain floating rate bonds issued by central and state governments. This TDS will only apply if the annual income from these bonds exceeds ₹10,000. The new TDS rule, coming into effect on October 1, 2024, aims to standardize the tax treatment of floating rate bonds, ensuring that investors earning significant interest on these bonds contribute to the national revenue.
While this may impact investors holding government-issued bonds, it ensures that a standard taxation framework is applied uniformly. Individuals and institutions will need to consider this additional tax when planning their investments in floating rate bonds to ensure compliance and accurate financial forecasting.
TDS Rate Adjustments
Several changes to the Tax Deducted at Source (TDS) rates were approved in the Union Budget 2024, and these adjustments will take effect from October 1. The TDS rates for payments under specific sections, including 19DA, 194H, 194-IB, and 194M, have been reduced from 5% to 2%. This reduction will lower the tax burden on transactions related to commissions, rent, and contractual payments, benefiting taxpayers engaged in these areas.
Additionally, the TDS rate for e-commerce operators has been significantly reduced from 1% to 0.1%. This move is seen as a way to support the growing e-commerce sector, where transactions are often small but frequent. By reducing the TDS rate, the government aims to simplify tax compliance for e-commerce platforms while ensuring that the appropriate taxes are collected efficiently.
Direct Tax Vivad Se Vishwas Scheme 2024
The Central Board of Direct Taxes (CBDT) has confirmed that the Direct Tax Vivad Se Vishwas Scheme 2024 will be effective from October 1. This scheme is designed to reduce income tax litigation by allowing taxpayers to resolve ongoing disputes. These disputes include appeals pending in the Supreme Court, high courts, and other appellate authorities as of July 22, 2024.
The Vivad Se Vishwas Scheme aims to provide a quicker and more streamlined resolution process for taxpayers involved in long-standing tax disputes. By offering a settlement mechanism, the government seeks to clear the backlog of tax litigation cases and promote a more amicable resolution process. This scheme will help both taxpayers and the government save time and resources by avoiding prolonged legal battles.
As we enter the final quarter of 2024, several key financial rule changes are set to take effect from October 1, bringing adjustments to tax rates, bond investments, and PAN card applications. These changes, introduced in the Union Budget 2024, reflect the government’s ongoing efforts to enhance tax compliance, prevent misuse of identification documents, and support various sectors of the economy.
For individuals and businesses, staying informed about these updates is crucial for maintaining compliance and managing financial operations efficiently. Whether you are an investor, a business owner, or a taxpayer, understanding these changes will help you navigate the evolving financial landscape.