Income tax rule changes effective from October 1
NEW DELHI: In the Budget 2024, finance minister Nirmala Sitharaman announced several modifications to income tax rules, some of which will take effect starting October 1, 2024. The updates include taxation on share buybacks, Aadhaar card, Securities Transaction Tax (STT), tax deducted at source (TDS) rates, and the introduction of the Direct Tax Vivad Se Vishwas Scheme 2024, all of which are part of the Finance Bill 2024.
From Oct 1, the sum paid by a domestic company for buyback of its own shares will be taxable as dividend in the hands of shareholders who received payment from such buyback and will be taxable at applicable rates.
“No deduction for cost of acquisition of such shares will be available. It would only generate a capital loss in the hands of the shareholder and in case in future the shareholder doesn’t generate any other capital gain, such capital loss would be a waste,” said Vivek Jalan, Partner - Tax Connect Advisory Services LLP.
In Budget 2024, the government announced reductions in TDS rates for various payment categories. The new TDS rates are now set at 2% instead of the previous 5% for payments under Sections 194DA, 194H, 194-IB, and 194M.
Additionally, the TDS rate for e-commerce operators has been lowered from 1% to just 0.1%. These changes will impact payments related to life insurance policies, commissions on lottery ticket sales, commission or brokerage fees and rent payments made by individuals or Hindu Undivided Families (HUFs).
Starting October 1, STT on futures and options (F&O) trading will see a surge. The tax rates for F&O securities will rise to 0.02% for futures and 0.1% for options. Income derived from share buybacks will be taxed as per the beneficiaries’ taxable income. STT on options sales will rise from 0.0625% to 0.1% of the premium.
In Budget, the government had proposed elimination of the provision that permitted individuals to quote their Aadhaar Enrolment ID instead of their Aadhaar number. This decision is intended to tackle issues related to misuse and duplication of Permanent Account Numbers (PAN).
Share buyback will be taxable as dividend from Oct 1
From Oct 1, sum paid by a company for buyback of its own shares will be taxable as dividend in the hands of shareholders who received payment from such buyback and will be taxable at applicable rates. The govt had announced reductions in TDS rates for various payment categories.