The provisions of Finance (No. 2) Bill, 2024 (hereafter referred to as “the Bill”), relating to direct taxes seek to amend the Income-tax Act, 1961 (hereafter referred to as `the Act`), to continue reforms in direct tax system through tax reliefs, removing difficulties faced by taxpayers and rationalisation of various provisions. The Bill also seeks to amend the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, Chapter VII of Finance (No. 2) Act, 2004 (‘Securities Trasaction Tax’, STT in short), Chapter VIII of Finance Act, 2016 (‘Equalisation Levy’) and Prohibition of Benami Property Transaction Act, 1988 (‘Benami Act’).
With a view to achieving the above, the various proposals for amendments are organized under the following heads:—
(A) Rates of income-tax;
1. Rates of income-tax in respect of income liable to tax for the assessment year 2024-25.
In respect of income of all categories of assessees liable to tax for the assessment year 2024-25, the rates of income-tax have either been specified in specific sections of the Act (like section 115BAA or section 115BAB for domestic companies, section 115BAC for individual/HUF/AOP (other than a co-operative society)/BOI/AJP and section 115BAD or section 115BAE for cooperative societies) or have been specified in Part I of the First Schedule to the Bill. There is no change proposed in tax rates either in these specific sections or in the First Schedule. The rates provided in sections 115BAA or 115BAB or 115BAC or 115BAD or 115BAE of the Act for the assessment year 2024-25 would be same as already enacted. Similarly rates laid down in Part III of the First Schedule to the Finance Act, 2023, for the purposes of computation of “advance tax”, deduction of tax at source from “Salaries” and charging of tax payable in certain cases for the assessment year 2024-25 would now become part I of the first schedule. Part III would now apply for the assessment year 2025-26.
Tax Rates under Section 115BAC—
For assessment year 2024-25, as per the provisions of sub-section (1A) of section 115BAC of the Act, an individual or Hindu undivided family or association of persons [other than a co-operative society], or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, has to pay tax in respect of the total income at following rates:
| Total Income (Rs) | Rate |
| Up to 3,00,000 | Nil |
| From 3,00,001 to 6,00,000 | 5% |
| From 6,00,001 to 9,00,000 | 10% |
| From 9,00,001 to 12,00,000 | 15% |
| From 12,00,001 to 15,00,000 | 20% |
| Above 15,00,000 | 30% |
2. The above mentioned rates shall apply, unless an option is exercised as per provisions of sub-section (6) of section 115BAC. Thus, rates specified in sub-section (1A) of section 115BAC of the Act are the default rates.
3. In respect of income chargeable to tax under clause (i) of sub-section (1A) of section 115BAC of the Act, the income-tax for the assessment year 2024-25 shall be increased by a surcharge, for the purposes of the Union, computed, in the case of every individual or Hindu undivided family or association of persons, or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act,-
(i) having a total income (including the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Act) exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of 10% of such income-tax;
(ii) having a total income (including the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Act) exceeding one crore rupees but not exceeding two crore rupees, at the rate of 15% of such income-tax;
(iii) having a total income (excluding the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Act) exceeding two crore rupees, at the rate of 25% of such income-tax;
(iv) having a total income (including the income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Act) exceeding two crore rupees, but is not covered under clause (iii) above, at the rate of 15% of such income-tax;
3.1 In case where the provisions of sub-section (1A) of section 115BAC are applicable and the total income includes any income by way of dividend or income under the provisions of section 111A, section 112 and section 112A of the Act, the rate of surcharge on the income-tax in respect of that part of income shall not exceed 15%.
3.2 Further, in the case of an association of persons consisting of only companies as its members, and having its income chargeable to tax under sub-section (1A) of section 115BAC, the rate of surcharge on the income-tax shall not exceed 15%.
3.3 Marginal relief shall be provided in such cases.
Tax rates under Part I of the First Schedule applicable for the assessment year 2024-25
A. Individual, HUF, Association Of Persons (AOP), Body Of Individuals (BOI), Artificial Juridical Person.
Paragraph A of Part-I of First Schedule to the Bill provides following rates of income-tax:—
(i) The rates of income-tax in the case of every individual (other than those mentioned in (ii) and (iii) below) or HUF or every association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act (not being a case to which any other Paragraph of Part I applies) are as under:—
| Total Income (Rs) | Rate |
| Up to Rs. 2,50,000 | Nil |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
(ii) In the case of every individual, being a resident in India, who is of the age of 60 years or more but less than 80 years at any time during the previous year,—
| Total Income (Rs) | Rate |
| Up to Rs. 3,00,000 | Nil |
| Rs. 3,00,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
(iii) in the case of every individual, being a resident in India, who is of the age of eighty years or more at any time during the previous year,—
| Total Income (Rs) | Rate |
| Up to Rs. 5,00,000 | Nil |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
These rates are the same as those applicable for the assessment year 2023-24.
B. Co-operative Societies
In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part I of the First Schedule to the Bill. They remain unchanged at (10% up to Rs. 10,000; 20% between Rs. 10,001 and Rs. 20,000; and 30% in excess of Rs. 20,000).
C. Firms
In the case of firms, the rate of income-tax has been specified in Paragraph C of Part I of the First Schedule to the Bill. They remain unchanged at 30%.
D. Local authorities
The rate of income-tax in the case of every local authority has been specified in Paragraph D of Part I of the First Schedule to the Bill. They remain unchanged at 30%.
E. Companies
The rates of income-tax in the case of companies have been specified in Paragraph E of Part I of the First Schedule to the Bill and remain unchanged vis-à- vis those for the AY 2023-24. In case of domestic company, the rate of income-tax shall be 25% of the total income, if the total turnover or gross receipts of the previous year 2021-22 does not exceed four hundred crore rupees and in all other cases the rate of income-tax shall be 30% of the total income.
In the case of company other than domestic company, the rates of tax are the same as those specified for the AY 2023-24.
(2) Surcharge on income-tax.
The rates of surcharge on the amount of income-tax for the purposes of the Union is the same as that specified for the FY 2022-23. Further, for person whose income is chargeable to tax under sub-section (1A) of section 115BAC of the Act, the surcharge at the rate of 37% on the income or aggregate of income of such person (excluding the income by way of dividend or income under the provisions of sections 111A, 112 and 112A of the Act) exceeding five crore rupees is not applicable. In such cases the surcharge is restricted to 25%.
(3) Marginal Relief—
Marginal relief has also been provided in all cases where surcharge is proposed to be imposed.
(4) Education Cess—
For assessment year 2024-25, “Health and Education Cess” is to be levied at the rate of 4% on the amount of income-tax so computed, inclusive of surcharge wherever applicable, in all cases. No marginal relief shall be available in respect of such cess.
2. Rates for Deduction of Income-Tax at Source during the Financial Year (FY) 2024-25 from certain incomes other than “Salaries”.
1. The rates for deduction of income-tax at source during the FY 2024-25 under the provisions of section 193, 194A, 194B, 194BB, 194D, 194LBA, 194LBB, 194LBC and 195 have been specified in Part II of the First Schedule to the Bill.
2. For sections specifying the rate of deduction of tax at source, the tax shall continue to be deducted as per the provisions of the relevant sections of the Act.
3. It is proposed that for deduction of income-tax at source on other income in case of company which is not a domestic company, rates shall be reduced from 40% to 35%.
4. It is proposed that for deduction of income-tax at source on the incomes in the nature of capital gains for non-residents, the rates shall be as per the Table below:
| Sl.No. | Income | For transfers taking place before 23rd day of July, 2024 / Rate of TDS | For transfers taking place on or after 23rd day of July, 2024 / Rate of TDS |
| (1) | long-term capital gains referred to in section 115E | 10% | 12.5% |
| (2) | long-term capital gains referred to in sub-clause (iii) of clause (c) of sub- section (1) of section 112 | 10% | The clause is not applicable for transfers on or after 23rd July, 2024 |
| (3) | long-term capital gains referred to in section 112A exceeding one lakh twenty five thousand rupees | 10% | 12.5% |
| (4) | long-term capital gains [not being long- term capital gains referred to in clauses (33) and (36) of section 10] | 20% | 12.5% |
| (5) | short-term capital referred to in section 111A | 15% | 20% |
5. Apart from the above, the rates will remain the same as those specified in Part II of the First Schedule to the Finance Act, 2023, for the purposes of deduction of income-tax at source during the FY 2024-25.
6. The surcharge on the amount of income-tax for the purposes of the Union is the same as that specified for the FY 2023-24.
(2) Education Cess—
“Health and Education Cess” shall continue to be levied at the rate of four per cent. of income tax including surcharge wherever applicable, in the cases of persons not resident in India including company other than a domestic company.
3. Rates for Deduction of Income-Tax at Source from “Salaries”, Computation of “Advance tax” and Charging of Income-Tax in Special Cases during the FY 2024-25 (Assessment Year 2025-26).
The rates for deduction of income-tax at source from “Salaries” or under section 194P of the Act during the FY 2024-25 and also for computation of “advance tax” payable during the said year in the case of all categories of assessees have been specified in Part III of the First Schedule to the Bill. These rates are also applicable for charging income-tax during the FY 2024-25 on current incomes in cases where accelerated assessments have to be made, for instance, provisional assessment of shipping profits arising in India to non-residents, assessment of persons leaving India for good during the financial year, assessment of persons who are likely to transfer property to avoid tax, assessment of bodies formed for a short duration, etc. The salient features of the rates specified in the said Part III are indicated in the following paragraphs-
A. Individual, HUF, Association Of Persons (AOP), Body Of Individuals (BOI), Artificial Juridical Person.
| Sl. No. | Total income | Rate of tax |
| (1) | (2) | (3) |
| 1. | Upto Rs. 3,00,000 | Nil |
| 2. | From Rs. 3,00,001 to Rs. 7,00,000 | 5% |
| 3. | From Rs. 7,00,001 to Rs. 10,00,000 | 10% |
| 4. | From Rs. 10,00,001 to Rs. 12,00,000 | 15% |
| 5. | From Rs. 12,00,001 to Rs. 15,00,000 | 20% |
| 6. | Above Rs. 15,00,000 | 30% |
With effect from assessment year 2025-26, it is proposed that the following rates provided under the proposed clause (ii) of sub-section (1A) of section 115BAC of the Act shall be the rates applicable for determining the income-tax payable in respect of the total income of a person, being an individual or Hindu undivided family or association of persons [other than a co-operative society], or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2:—
2. However, if such person exercises the option under sub-section (6) of section 115BAC of the Act, the rates as provided in Part III of the First Schedule shall be applicable.
3. Paragraph A of Part-III of First Schedule to the Bill provides following rates of income-tax:—
(i) The rates of income-tax in the case of every individual (other than those mentioned in (ii) and (iii) below) or HUF or every association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Act (not being a case to which any other Paragraph of Part III applies) are as under:—
| Total Income (Rs) | Rate |
| Up to Rs. 2,50,000 | Nil |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
(ii) In the case of every individual, being a resident in India, who is of the age of sixty years or more but less than eighty years at any time during the previous year,—
| Total Income (Rs) | Rate |
| Up to Rs. 3,00,000 | Nil |
| Rs. 3,00,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
(iii) in the case of every individual, being a resident in India, who is of the age of eighty years or more at any time during the previous year,—
| Total Income (Rs) | Rate |
| Up to Rs. 5,00,000 | Nil |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| Above Rs. 10,00,000 | 30% |
4. The amount of income-tax computed in accordance with the preceding provisions of this Paragraph (including capital gains under section 111A, 112 and 112A), shall be increased by a surcharge at the rate of,—
(a) having a total income (including the income by way of dividend or income under the provisions of sections 111A, 112 and 112A of the Act) exceeding fifty lakh rupees but not exceeding one crore rupees, at the rate of 10% of such income-tax;
(b) having a total income (including the income by way of dividend or income under the provisions of sections 111A, 112 and 112A of the Act) exceeding one crore rupees, at the rate of 15% of such income-tax;
(c) having a total income (excluding the income by way of dividend or income under the provisions of sections 111A, 112 and 112A of the Act) exceeding two crore rupees but not exceeding five crore rupees, at the rate of 25% of such income-tax;
(d) having a total income (excluding the income by way of dividend or income under the provisions of sections 111A, 112 and 112A of the Act) exceeding five crore rupees, at the rate of 37% of such income-tax;
(e) having a total income (including the income by way of dividend or income under the provisions of section 111A, 112 and section 112A of the Act) exceeding two crore rupees, but is not covered under clauses (c) and (d), shall be applicable at the rate of 15% of such income-tax.
4.1 Provided that in case where the total income includes any income by way of dividend or income chargeable under section 111A, section 112 and section 112A of the Act, the rate of surcharge on the amount of income-tax computed in respect of that part of income shall not exceed 15%.
4.2 Provided further that in case of an association of persons consisting of only companies as its members, the rate of surcharge on the amount of income-tax shall not exceed 15%.
4.3 Further, for person whose income is chargeable to tax under sub-section (1A) of section115BAC of the Act, the surcharge at the rate 37% on the income or aggregate of income of such person (excluding the income by way of dividend or income under the provisions of sections 111A, 112 and 112A of the Act) exceeding five crore rupees shall not be applicable. In such cases the surcharge shall be restricted to 25%.
5. Marginal relief is provided in cases of surcharge.
B. Co-operative Societies
In the case of co-operative societies, the rates of income-tax have been specified in Paragraph B of Part III of the First Schedule to the Bill. These rates will continue to be the same as those specified for FY 2023-24. The amount of income- tax shall be increased by a surcharge at the rate of 7% of such income-tax in case the total income of a co-operative society exceeds Rs. 1 Crore but does not exceed Rs. 10 Crore. Surcharge at the rate of 12% of such income-tax shall continue to be levied in case of a co-operative society having a total income exceeding Rs. 10 Crore.
2. Marginal relief is provided in cases of surcharge.
3. On satisfaction of certain conditions, a co-operative society resident in India shall have the option to pay tax at 22% as per the provisions of section 115BAD. Surcharge would be at 10% on such tax.
Further, under section 115BAE of the Act, a manufacturing co-operative society set up on or after 1.4.2023, which commenced manufacturing or production on or before 31.3.2024 and does not avail of any specified incentive or deductions, may opt to pay tax at a concessional rate of 15% for assessment year 2024-25 onwards. Surcharge would be at 10% on such tax.
C. Firms
In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for FY 2023-24. The amount of income-tax shall be increased by a surcharge at the rate of 12% of such income-tax in case of a firm having a total income exceeding Rs. 1 Crore. However, the total amount payable as income- tax and surcharge on total income exceeding Rs. 1 Crore shall not exceed the total amount payable as income-tax on a total income of Rs. 1 Crore by more than the amount of income that exceeds Rs. 1 Crore.
D. Local authorities
The rate of income-tax in the case of every local authority has been specified in Paragraph D of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for the FY 2023-24. The amount of income-tax shall be increased by a surcharge at the rate of 12% of such income-tax in case of a local authority having a total income exceeding Rs. 1 Crore. However, the total amount payable as income-tax and surcharge on total income exceeding Rs. 1 Crore shall not exceed the total amount payable as income-tax on a total income of Rs. 1 Crore by more than the amount of income that exceeds Rs. 1 Crore.
E. Companies
The rates of income-tax in the case of companies have been specified in Paragraph E of Part III of the First Schedule to the Bill. In case of domestic company, the rate of income-tax shall be 25% of the total income, if the total turnover or gross receipts of the previous year 2022-23 does not exceed four hundred crore rupees and where the companies continue in section 115BA regime. In all other cases the rate of income-tax shall be 30% of the total income. However, domestic companies also have an option to opt for taxation under section 115BAA or section 115BAB of the Act on fulfillment of conditions contained therein. The tax rate is 15% in section 115BAB and 22% in section 115BAA. Surcharge is 10% in both cases.
2. In the case of a company other than a domestic company, it is proposed that the rates of tax shall be reduced from 40% to 35%, on income other than income chargeable at special rates, specified in respective sections of Chapter XII of the Act.
3. Surcharge at the rate of 7% shall continue to be levied in case of a domestic company (except those opting for taxation under section 115BAA and section 115BAB of the Act), if the total income of the domestic company exceeds one crore rupees but does not exceed ten crore rupees. Surcharge at the rate of 12% shall continue to be levied, if the total income of the domestic company (except those opting for taxation under section 115BAA and section 115BAB of the Act) exceeds ten crore rupees.
4. In case of companies other than domestic companies, the existing surcharge of 2% shall continue to be levied, if the total income exceeds one crore rupees but does not exceed ten crore rupees. Surcharge at the rate of 5% shall continue to be levied, if the total income of the company other than domestic company exceeds ten crore rupees.
5. It is proposed that the surcharge shall not apply on advance tax / tax computed on income of specified fund (referred to in clause (c) of the Explanation to clause (4D) of section 10) that is chargeable under clause (a) of sub-section (1) of section 115AD of the Act.
6. Marginal relief is provided in surcharge in all cases.
7. In other cases [including sub-section (2A) of section 92CE, 115QA, 115R, 115TA or 115TD], the surcharge shall be levied at the rate of 12%
8. For FY 2024-25, additional surcharge called the “Health and Education Cess on income-tax” shall be levied at the rate of 4% on the amount of tax computed, inclusive of surcharge (wherever applicable), in all cases. No marginal relief shall be available in respect of such cess.
[Clauses 2, 37 & the First Schedule]
Increase in Standard Deduction and deduction from family pension for tax- payers in tax regime
The existing provision of clause (ia) of section 16 of the Act provides that a deduction of fifty thousand rupees or the amount of the salary, whichever is less, shall be made before computing the income under the head “Salaries”.
2. Further, the existing provision of clause (iia) of section 57 of the Act provides that in the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and one-third per cent of such income or fifteen thousand rupees, whichever is less, shall be made before computing the income chargeable under the head “Income from other sources”.
3. With the aim of encouraging and incentivizing taxpayers (specially the salaried taxpayers) to shift to the new tax regime, it is proposed to insert a proviso after clause (ia) of section 16 to provide that in a case where income-tax is computed under clause (ii) of sub-section (1A) of section 115BAC of the Act, the provisions of this clause shall have effect as if for the words “fifty thousand rupees”, the words “seventy five thousand rupees” had been substituted.
4. It is also proposed to insert a proviso in clause (iia) of section 57 to provide that in a case where income-tax is computed under clause (ii) of sub-section (1A) of section 115BAC of the Act, the provisions of this clause shall have effect as if for the words “fifteen thousand rupees”, the words “twenty five thousand rupees” had been substituted.
5. These amendments will take effect from the 1st day of April, 2025, and will accordingly apply to assessment year 2025-26 and subsequent assessment years.
[Clauses 10 & 24]
Increase in amount allowed as deduction to non-government employers and their employees for employer contribution to a Pension Scheme referred in section 80CCD
Section 36 of the Act pertains to other deductions allowed while computing the income under the head ‘Profits and gains of business or profession’. Clause (iva) of sub-section (1) of said section states that any sum paid by the assessee as an employer by way of contribution towards a pension scheme, as referred to in section 80CCD of the Act, on account of an employee, to the extent it does not exceed ten per cent of the salary of the employee in the previous year, shall be allowed as a deduction to the employer.
2. It is proposed to amend clause (iva) of sub-section (1) of section 36 of the Act, to increase the amount of employer contribution allowed as deduction to the employer, from the extent of 10% to the extent of 14% of the salary of the employee in the previous year.
3. Section 80CCD deals with deduction in respect of contribution to pension scheme of Central Government. Sub-section (2) of section 80CCD states that any contribution by the Central Government or State Government or any other employer to the account of an employee referred to in sub-section (1), shall be allowed as a deduction as does not exceed ––
(a) 14% (where such contribution is made by the Central Government or State Government); and
(b) 10% (where such contribution is made by any other employer) of the employees’ salary in previous year.
4. It is proposed to amend sub-section (2) of section 80CCD of the Act, to provide that where such contribution has been made by any other employer (not being Central Government or State Government), the employee shall be allowed as a deduction an amount not exceeding 14% of the employee’s salary. This is being increased only in the case where the employee’s salary is chargeable to tax under sub-section (1A) of section 115BAC of the Act.
5. The amendments will take from the 1st day of April, 2025 and will accordingly apply from assessment year 2025-2026 onwards.
[Clauses 12 & 25]
