Understanding the Finance Act (No. 2) of 2024: Key Changes for Taxpayers
The Finance Act (No. 2) of 2024, enacted on August 20, 2024, has introduced significant changes to India’s taxation framework. These changes focus on simplifying capital gains taxes and improving procedural aspects of tax assessments. This blog post breaks down these updates to help taxpayers understand what has changed and how it impacts them.
Revamped Capital Gains Taxation
For Residents (Individuals and HUFs)
Long-Term Capital Gains (LTCG) on Property Acquired Before July 23, 2024:
If land or buildings acquired before this date are sold after, the tax rate has been set at 12.5% without indexation benefits. However, if this new rate results in a higher tax than what would have been due under the old regime (20% with indexation), taxpayers will pay only what they would have under the old system. This safeguard ensures that, while the rate decreases, the tax liability doesn’t significantly increase due to the removal of indexation.
Implications:
This change aims to simplify tax calculations but also provides protection against potential tax hikes for resident individuals and Hindu Undivided Families (HUFs).
For Non-Residents
LTCG on Unlisted Securities:
Before July 23, 2024, the rate was 10% without indexation or foreign currency benefits. Post this date, it’s now 12.5%, with the same conditions. The change clarifies that non-residents will not benefit from foreign currency conversion for tax computation.
Procedural Enhancements
Reassessment
The reassessment period has been reduced to five years and three months, aiming to expedite the resolution of tax disputes. Under the new provisions, reassessments can be initiated based on information collected through specific schemes, enhancing the efficiency of the reassessment process.
Special Assessment for Search Cases
For searches conducted after September 1, 2024, a new block assessment scheme taxes undisclosed income at 60%. The definition of “undisclosed income” has also been expanded to include incorrectly claimed exemptions, broadening the scope for what can be taxed.
TDS/TCS Credit Adjustment
Employers and Salary TDS:
Starting October 1, 2024, employers can now reduce TDS on salaries by crediting TDS/TCS collected elsewhere. This amendment addresses an oversight where TCS on transactions not corresponding to income would have reduced TDS on salaries, impacting the tax collected.
Public Reaction and Key Considerations
On platforms like X, discussions around these changes are gaining traction. Key topics include:
- Impact on Real Estate Investments: The relief for resident individuals and HUFs on capital gains might encourage property transactions, while NRIs are excluded from this benefit.
- Increased Scrutiny: The expanded definition of “undisclosed income” and the reassessment process could lead to higher scrutiny of taxpayer claims.
The Finance Act (No. 2) of 2024 aims to simplify and make tax administration more equitable. However, the nuances of these changes, particularly around capital gains and reassessment procedures, require careful consideration. Taxpayers, especially those involved in real estate or investments in unlisted securities, need to understand how these updates impact their liabilities.
For those looking to navigate these changes effectively, it might be beneficial to consult tax professionals who can offer guidance tailored to specific circumstances.
Call to Action:
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