For the assessment years 2024-25 and 2025-26, tax rates under the old tax regime for individuals, HUFs, AOPs, BOIs, and artificial juridical persons offer an exemption limit of ₹2.5 lakh, with slabs of 5% on income between ₹2.5 lakh and ₹5 lakh, 20% on income between ₹5 lakh and ₹10 lakh, and 30% on income above ₹10 lakh. For senior citizens (60-80 years), the exemption limit is ₹3 lakh, and for super senior citizens (above 80 years), it is ₹5 lakh. Under the new tax regime (section 115BAC), which is now the default for individuals, HUFs, AOPs, BOIs, and artificial juridical persons, the exemption limit is ₹3 lakh, with slabs of 5% on income from ₹3 lakh to ₹7 lakh, 10% on income from ₹7 lakh to ₹10 lakh, 15% on income from ₹10 lakh to ₹12 lakh, 20% on income from ₹12 lakh to ₹15 lakh, and 30% on income above ₹15 lakh. Corporate tax rates remain 30%, with a reduced rate of 25% for companies with a turnover below ₹400 crore. Firms and LLPs are taxed at 30%, while co-operative societies are taxed at varying rates with an option to opt for the alternative tax regime under section 115BAD/115BAE. Surcharges and health and education cess are also applicable based on income levels.
Table of Contents
- Tax Rates
- Amendment to Section 2(22)
- Amendment to Section 10(4D)
- Income of Foreign Company from Lease Rental of Cruise Ships [Sec. 10(15B)]
- Amendment to Section 10(23EE)
- Amendment to Section 10(23FB)
- Amendment to Section 10(34A)
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1. Tax Rates
Tax rates under the regular tax regime for the assessment years 2024-25 and 2025-26 are given in Referencer 1. Tax rates under the alternative tax regime under section 115BA/115BAA/115BAB/ 115BAC/115BAD/115BAE are given in Referencer 3. Alternative tax regime is optional [one has to exercise the option under section 115BA(4)/115BAA(5)/115BAB(7)/115BAC(5)/115BAD(5)/115BAE(5) to avail the benefit of alternative tax regime]. However, in the case of an individual/HUF/AOP/BOI/artificial juridical person, the alternate tax regime is the default tax regime from the assessment year 2024-25 [one has to exercise the option under section 115BAC(6) to avail the benefit of the regular tax regime].
1.1 Income-tax –The following are income-tax rates for the assessment years 2024-25 and 2025-26 –
1.1a Individual/HUF/AOP/BOI/Artificial Juridical Person – Tax rates pertaining to these assessees are as follows –
- Regular Tax Regime – Exemption limit is Rs. 2,50,0001. A higher exemption limit is applicable in the case of a senior citizen or super senior citizen.
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- Senior citizen – Senior citizen is a resident individual who is at least 60 years of age at any time during the previous year but less than 80 years on the last day of previous year [assessment year 2024-25 (date of birth: on or after April 2, 1944, but before April 2, 1964) or assessment year 2025-26 (date of birth: on or after April 2, 1945 but before April 2, 1965)].
In the case of a senior citizen, exemption limit is Rs. 3,00,0001. Net income in the range of Rs. 3,00,000 to Rs. 5,00,000 is taxable at the rate of 5 per cent. Between Rs. 5,00,000 and Rs. 10,00,000, the slab rate is 20 per cent and the income exceeding Rs. 10,00,000 is taxable at the rate of 30 per cent. These rates are applicable only in the case of a resident (ordinarily or otherwise) senior citizen. In the case of a non-resident senior citizen, the exemption limit is Rs. 2,50,000 as given below. - Super senior citizen – A super senior citizen is a resident individual who is at least 80 years of age at any time during the previous year [assessment year 2024-25 (date of birth: before April 2, 1944) or assessment year 2025-26 (date of birth: before April 2, 1945)].
In the case of super senior citizen, first Rs. 5,00,000 of net income is exempt from tax. Net income in the range of Rs. 5,00,000 to Rs. 10,00,000 is taxable at the rate of 20 per cent. Net income exceeding Rs. 10,00,000 is taxable at the rate of 30 per cent. These rates are applicable only in the case of a resident (ordinarily or otherwise) super senior citizen. In the case of a non-resident, the exemption limit will be Rs. 2,50,000 as given below. - Any other individual, any HUF/AOP/BOI – This category includes the following taxpayers:
- Senior citizen – Senior citizen is a resident individual who is at least 60 years of age at any time during the previous year but less than 80 years on the last day of previous year [assessment year 2024-25 (date of birth: on or after April 2, 1944, but before April 2, 1964) or assessment year 2025-26 (date of birth: on or after April 2, 1945 but before April 2, 1965)].
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- Any other resident individual [assessment year 2024-25 (date of birth: on or after April 2, 1964) or assessment year 2025-26 (date of birth: on or after April 2, 1965)].
- Any non-resident individual irrespective of age.
- Any HUF, AOP, BOI, artificial juridical person.
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In the case of any of these assessees, first Rs. 2,50,0001 of net income is exempt from tax. Net income in the range of Rs. 2,50,000 to Rs. 5,00,000 is taxable at the rate of 5 per cent. On net income between Rs. 5,00,000 and Rs. 10,00,000, the slab rate is 20 per cent and income exceeding Rs. 10,00,000 is taxable at the rate of 30 per cent.
- Alternative Tax Regime – For an individual/HUF/AOP/BOI/artificial juridical person, the alternative tax regime is the default tax regime. One can exercise the option under section 115BAC(6) to avail the benefit of regular tax regime. Tax rates under the alternative tax regime are as follows:
| Section 115BAC(1A) For the assessment year 2024-25 |
Section 115BAC(1A) From the assessment year 2025-26 |
||
| Total income | Rate of tax | Total income | Rate of tax |
| Up to Rs. 3,00,000 | Nil | Up to Rs. 3,00,000 | Nil |
| From Rs. 3,00,001 to Rs. 6,00,000 | 5%2 | From Rs. 3,00,001 to Rs. 7,00,000 | 5%2 |
| From Rs. 6,00,001 to Rs. 9,00,000 | 10%2 | From Rs. 7,00,001 to Rs. 10,00,000 | 10% |
| From Rs. 9,00,001 to Rs. 12,00,000 | 15% | From Rs. 10,00,001 to Rs. 12,00,000 | 15% |
| From Rs. 12,00,001 to Rs. 15,00,000 | 20% | From Rs. 12,00,001 to Rs. 15,00,000 | 20% |
| Above Rs. 15,00,000 | 30% | Above Rs. 15,00,000 | 30% |
1.1b Firm – There is no change in the tax rate. A partnership firm (including a limited liability partnership firm) is taxable at the rate of 30 per cent.
1.1c Company – A domestic company is taxable at the rate of 30 per cent. However, tax rate is 25 per cent in the following cases –
- A domestic company (where its total turnover or gross receipt in the previous year 2021-22 does not exceed Rs. 400 crore) is taxable at the rate of 25 per cent (not 30 per cent) for the assessment year 2024-25.
- A domestic company (where its total turnover or gross receipt in the previous year 2022-23 does not exceed Rs. 400 crore) is taxable at the rate of 25 per cent (not 30 per cent) for the assessment year 2025-26.
A non-domestic company is taxable at the rate of 40 per cent (for the assessment year 2024-25) and 35 per cent (for the assessment year 2025-26).
Alternative tax regime for a domestic company – A domestic company can opt for the alternative tax regime provided under section 115BA or section 115BAA or section 115BAB.
1.1d Co-operative Society and Local Authority – In the case of a co-operative society/local authority, there is no change in the income-tax rates.
Alternative tax regime for a resident co-operative society – A resident co-operative society can opt for the alternative tax regime provided under section 115BAD or section 115BAE.
1.2 Surcharge on income-tax – Applicable surcharge (as a percentage of income-tax) for the assessment years 2024-25 and 2025-26 is as follows3
| Net income range | Surcharge as a % of income-tax | |
| Individuals/HUF/AOP/BOI/artificial juridical person |
0 – Rs. 50 lakh | Nil |
| Rs. 50 lakh – Rs. 1 crore | 10% | |
| Rs. 1 crore – Rs. 2 crore | 15% | |
| Rs. 2 crore – Rs. 5 crore | 25% | |
| Above Rs. 5 crore | 37% | |
| Firm/local authority | 0 – Rs. 1 crore | Nil |
| Above Rs. 1 crore | 12% | |
| Co-operative society | 0 – Rs. 1 crore | Nil |
| Rs. 1 crore – Rs. 10 crore | 7% | |
| Above Rs. 10 crore | 12% | |
| Domestic company | 0 – Rs. 1 crore | Nil |
| Rs. 1 crore – Rs. 10 crore | 7% | |
| Above Rs. 10 crore | 12% | |
| Foreign company | 0 – Rs. 1 crore | Nil |
| Rs. 1 crore – Rs. 10 crore | 2% | |
| Above Rs. 10 crore | 5% |
Note – The above surcharge is subject to a marginal relief.
1.2a Surcharge When Individual/HUF/AOP, etc., Has Dividend Income or Income Taxable Under Section 111A/112/112A – Surcharge for the assessment years 2024-25 and 2025-26 is as follows3a –
| Different situations | Nature and quantum of income of the assessee (i.e., individual, HUF, AOP, BOI or an artificial juridical person) | Surcharge on amount of income-tax computed on dividend income and income which is taxable under section 111A/112/112A | Surcharge on amount of income-tax computed on other incomes |
| Situation 1 | Total income (including dividend income and income under section 111A/112/112A) does not exceed Rs. 50 lakh | Nil | Nil |
| Situation 2 | Total income (including dividend income and income under section 111A/112/112A) exceeds Rs. 50 lakh but does not exceed Rs. 1 crore | 10% | 10% |
| Situation 3 | Total income (including dividend income and income under section 111A/112/112A) exceeds Rs. 1 crore but does not exceed Rs. 2 crore | 15% | 15% |
| Situation 4 | Total income (excluding dividend income and income under section 111A/112/112A) exceeds Rs. 2 crore but does not exceed Rs. 5 crore | 15% | 25% |
| Situation 5 | Total income (excluding dividend income and income under section 111A/112/112A) exceeds Rs. 5 crore | 15% | 37% |
| Situation 6 | Total income (including dividend income and income under section 111A/112/112A) exceeds Rs. 2 crore (but it is not covered by Situation 4 and Situation 5) | 15% | 15% |
Where the total income includes any dividend income and/or income chargeable under section 111A/112/112A the rate of surcharge on the amount of income-tax computed on that part of income, shall not exceed 15 per cent. Moreover, in the case of an AOP (consisting of only companies as its members), the rate of surcharge on the amount of income-tax shall not exceed 15 per cent. Further, in the case of an individual/HUF/AOP/BOI/artificial juridical person, surcharge (if tax is payable under the alternative tax regime) cannot exceed 25 per cent.
It has been clarified by CBDT that the derivatives (future and options) are not treated as capital assets and the income arising from the transfer of the derivatives is treated as business income and is liable for normal rate of tax (and such case will fall in the 4th column of the above table). However, in the case of Foreign Institutional Investors (FPI), the derivatives are treated as capital assets and the gains arising from the transfer of the same are treated as capital gains and are subject to a special rate of tax as per the provisions of section 115AD. Consequently, surcharge on income-tax payable on gains arising from the transfer of derivatives (future and options) by FPI which are liable to special rate of tax under section 115AD, cannot exceed 15 per cent (it will fall under 3rd column of the aforesaid table).
1.2b Surcharge When a Domestic Company Pays Tax Under Section 115BAA or Section 115BAB – In the case of a domestic company which has opted for the alternative tax regime under section 115BAA or 115BAB, surcharge is 10 per cent of income-tax (regardless of quantum of income).
1.2c Surcharge When a Resident Co-operative Society Pays Tax Under Section 115BAD/115BAE – In the case of a resident co-operative society which has opted for the alternative tax regime under section 115BAD or section 115BAE, surcharge is 10 per cent of income-tax (regardless of quantum of income).
1.3 Health and education cess on income-tax – For the assessment years 2024-25 and 2025-26, health and education cess (HEC) is 4 per cent of income-tax and surcharge3a.
1.4 Minimum alternate tax/alternate minimum tax – A corporate assessee is covered by minimum alternate tax under section 115JB. A non-corporate assessee is covered by alternate minimum tax under section 115JC. However, minimum alternate tax/alternate minimum tax is not applicable if tax is payable under the alternative tax regime under section 115BAA/115BAB/115BAC/115BAD/115BAE.
Tax rate – Basic rate for minimum alternate tax is 15 per cent and alternate minimum tax is 18.5 per cent (15 per cent for co-operative society) for the assessment years 2024-25 and 2025-26. If a unit is located in an International Financial Services Centre4 and derives its income solely in convertible foreign exchange, the minimum alternate tax/alternate minimum tax is 9 per cent of book profit.
Surcharge – Surcharge on minimum alternate tax/alternate minimum tax is as follows –
| Adjusted total income/book profit range | Individuals/HUF/AOP/BOI/artificial juridical person | Firm/local authority | Co-operative society | Domestic company | Foreign company |
| 0 – Rs. 50 lakh | Nil | Nil | Nil | Nil | Nil |
| Rs. 50 lakh – Rs. 1 crore | 10% | Nil | Nil | Nil | Nil |
| Rs. 1 crore – Rs. 2 crore | 15% | 12% | 7% | 7% | 2% |
| Rs. 2 crore – Rs. 5 crore | 25% | 12% | 7% | 7% | 2% |
| Rs. 5 crore – Rs. 10 crore | 37% | 12% | 7% | 7% | 2% |
| Above Rs. 10 crore | 37% | 12% | 12% | 12% | 5% |
Notes –
- Surcharge (given above) is subject to marginal relief.
- In the case of an AOP (having only companies as its members), surcharge cannot exceed 15%.
HEC –HEC is 4 per cent of minimum alternate tax/alternate minimum tax and surcharge.
1.5 Marginal relief – The provisions pertaining to marginal relief are given below –
Individual/HUF/AOP/artificial juridical person having income above Rs. 50 lakh – In the case of these taxpayers, if the income is slightly higher than Rs. 50 lakh, a provision has been made to provide relief in marginal cases. The said relief is as follows –
If the net income exceeds Rs. 50 lakh, the total amount payable as income tax and surcharge on such income shall not exceed the total amount payable as income tax on a net income of Rs. 50 lakh by more than the amount of income that exceeds Rs. 50 lakh.
Individual/HUF/AOP/artificial juridical person having income between Rs. 1 crore and Rs. 2 crore – In the case of these taxpayers, if income exceeds Rs. 1 crore but does not exceed Rs. 2 crore, the applicable surcharge will increase from 10 per cent to 15 per cent. Marginal relief is provided when net income is slightly higher than Rs. 1 crore which is as given below –
If the net income of these taxpayers exceeds Rs. 1 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on net income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
Individual/HUF/AOP/artificial juridical person having income between Rs. 2 crore and Rs. 5 crore – In the case of these taxpayers, if income exceeds Rs. 2 crore but does not exceed Rs. 5 crore, the applicable surcharge will increase from 15 per cent to 25 per cent. Marginal relief is provided when net income is slightly higher than Rs. 2 crore which is as given below –
If the net income of these taxpayers exceeds Rs. 2 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on net income of Rs. 2 crore by more than the amount of income that exceeds Rs. 2 crore.
Individual/HUF/AOP/artificial juridical person having income exceeding Rs. 5 crore –In the case of these taxpayers, if income is more than Rs. 5 crore, the applicable surcharge will increase from 25 per cent to 37 per cent which is subject to marginal relief as follows –
If the net income of these taxpayers exceeds Rs. 5 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on net income of Rs. 5 crore by more than the amount of income that exceeds Rs. 5 crore.
Firms/local authorities having income above Rs. 1 crore – To avoid hardship, in the case of these taxpayers (having income of above Rs. 1 crore), a provision has been made to provide relief in marginal cases. The said relief is as follows –
If the net income exceeds Rs. 1 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a net income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
Domestic company/foreign company/co-operative society having income above Rs. 1 crore – In the case of a company/co-operative society, surcharge is not applicable if net income does not exceed Rs. 1 crore. If net income exceeds Rs. 1 crore, surcharge is applicable.
To avoid hardship, in the case of a company/co-operative society whose income is slightly higher than Rs. 1 crore, a provision has been made to provide relief in marginal cases. The said relief is as follows –
If the net income exceeds Rs. 1 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a net income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
Domestic company/foreign company/co-operative society having income above Rs. 10 crore – In the case of a company/co-operative society, if net income is more than Rs. 10 crore, the applicable surcharge will increase from 7 per cent to 12 per cent (in the case of foreign company, it increases from 2 per cent to 5 per cent). Consequently, another marginal relief is provided when net income is slightly higher than Rs. 10 crore which is as given below –
If the net income of a company/co-operative society exceeds Rs. 10 crore, the total amount payable as income tax and surcharge on such income shall not exceed the total amount payable as income tax and surcharge on net income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore.
1.5a Income Range When Marginal Relief Is Applicable – Marginal relief will be applicable in case net income falls in the following range for the assessment years 2024-25 and 2025-26 –
| Regular Tax Regime | |
| Income range to attract marginal relief | |
| Resident senior citizen | Rs. 50 lakh – Rs. 51.9552 lakh |
| Rs. 100 lakh – Rs. 102.145 lakh | |
| Rs. 200 lakh – Rs. 209.296 lakh | |
| Rs. 500 lakh – Rs. 530.173 lakh | |
| Resident super senior citizen | Rs. 50 lakh – Rs. 51.9402 lakh |
| Rs. 100 lakh – Rs. 102.1374 lakh | |
| Rs. 200 lakh – Rs. 209.28 lakh | |
| Rs. 500 lakh – Rs. 530.1528 lakh | |
| Any other resident individual, any non-resident individual, any HUF or any AOP/BOI/artificial juridical person | Rs. 50 lakh – Rs. 51.9589 lakh |
| Rs. 100 lakh – Rs. 102.1469 lakh | |
| Rs. 200 lakh – Rs. 209.30 lakh | |
| Rs. 500 lakh – Rs. 530.1782 lakh | |
| Firm | Rs. 100 lakh – Rs. 105.4216 lakh |
| Domestic company (tax rate: 25%) | Rs. 100 lakh – Rs. 102.389 lakh |
| Rs. 1000 lakh – Rs. 1017.3611 lakh | |
| Domestic company (tax rate: 30%) | Rs. 100 lakh – Rs. 103.0927 lakh |
| Rs. 1000 lakh – Rs. 1022.59030 lakh | |
| Foreign company (assessment year 2024-25) | Rs. 100 lakh – Rs. 101.3513 lakh |
| Rs. 1000 lakh – Rs. 1020.6896 lakh | |
| Alternative Tax Regime | |
| Individual, HUF, AOP, BOI or artificial juridical person (assessment year 2024-25) | Rs. 50 lakh – Rs. 51.791 lakh |
| Rs. 100 lakh – Rs. 102.061 lakh | |
| Rs. 200 lakh – Rs. 209.12 lakh | |
| Individual, HUF, AOP, BOI or artificial juridical person (assessment year 2025-26) | Rs. 50 lakh – Rs. 51.776 lakh |
| Rs. 100 lakh – Rs. 102.05 lakh | |
| Rs. 200 lakh – Rs. 209.10 lakh | |
Note: The above net income ranges will remain valid only if the assessee does not have any income which is chargeable to tax at special rate(s) of tax (e.g., long-term capital gains, short-term capital gains under section 111A, lottery income, etc.).
In the case of alternate minimum tax/minimum alternate tax, the marginal relief will be applicable in case adjusted total income/book profit falls in the following range for the assessment years 2024-25 and 2025-26 –
| Income range | |
| Individual/HUF/AOP/BOI/Artificial juridical person | Rs. 50 lakh – Rs. 51.16133 lakh |
| Rs. 100 lakh – Rs. 101.174976 lakh | |
| Rs. 200 lakh – Rs. 204.813 lakh | |
| Rs. 500 lakh – Rs. 514.8684 lakh | |
| Co-operative society/firm/local authority | Rs. 100 lakh – Rs. 102.8002 lakh |
| Domestic company | Rs. 100 lakh – Rs. 101.2507 lakh |
| Rs. 1000 lakh – Rs. 1009.0144 lakh | |
| Foreign company | Rs. 100 lakh – Rs. 100.35419 lakh |
| Rs. 1000 lakh – Rs. 1005.3412 lakh |
1.6 Maximum marginal tax rates – Maximum marginal tax rates (at highest level) for the assessment years 2023-24 and 2024-25 are given in the table below –
| Individual/HUF/BOI/AOP/artificial juridical person (alternative tax regime) | 39% |
| Individual/HUF/BOI/AOP/artificial juridical person (regular tax regime) | 42.744% |
| Firm (including limited liability partnership) | 34.944% |
| Co-operative society | 34.944% |
| Domestic company | 29.12%, 34.944% |
| Foreign company | 43.68% |
1.7 Rates for tax deduction/collection at source – During the financial year 2024-25, tax will be deducted at source under section 192/194P at the rate given.
1.7a Surcharge, Education Cess, Etc., in the Case of TDS/TCS – For the financial year 2024-25, these rates are as follows –
| TDS/TCS | Nature of payment | Recipient/collectee | Whether health and education cess @ 4% applicable | Whether surcharge applicable | |
| TDS | Salary (or payment covered by section 194P) | Resident/non-resident | Yes | Yes | Note 1 |
| TDS | Other than above | Resident | No | No | |
| TDS | Other than above | Non-resident/foreign company | Yes | Yes | Note 2 |
| TCS | Any | Resident | No | No | |
| TCS | Any | Non-resident/foreign company | Yes | Yes | Note 3 |
Notes –
- If the amount subject to TDS exceeds Rs. 50 lakh but does not exceed Rs. 1 crore, surcharge is 10 per cent of TDS. If it exceeds Rs. 1 crore but does not exceed Rs. 2 crore, surcharge is 15 per cent of TDS. If it exceeds Rs. 2 crore but does not exceed Rs. 5 crore, surcharge is 25 per cent of TDS. If it exceeds Rs. 5 crore, surcharge is 37 per cent (25 per cent under alternative tax regime) of TDS.
- If the recipient is a non-resident (individual/HUF/AOP/artificial juridical person) and the payment/credit subject to TDS exceeds Rs. 50 lakh but does not exceed Rs. 1 crore, surcharge is 10 per cent of TDS. If it exceeds Rs. 1 crore but does not exceed Rs. 2 crore, surcharge is 15 per cent of TDS. If it exceeds Rs. 2 crore but does not exceed Rs. 5 crore, surcharge is 25 per cent of TDS. If it exceeds Rs. 5 crore, surcharge is 37 per cent (25 per cent under alternative tax regime) of TDS. If the recipient is a non-resident firm and the payment/credit subject to TDS exceeds Rs. 1 crore, surcharge is 12 per cent of TDS. If the recipient is a non-resident co-operative society and the payment subject to TDS exceeds Rs. 1 crore but does not exceed Rs. 10 crore, surcharge is 7 per cent of TDS (it is 12 per cent of TDS if the payment/credit exceeds Rs. 10 crore). If the recipient is a foreign company and the payment subject to TDS exceeds Rs. 1 crore but does not exceed Rs. 10 crore, surcharge is 2 per cent of TDS (it is 5 per cent of TDS if the payment/credit exceeds Rs. 10 crore).
- If the purchaser/licensee/lessee is a non-resident (individual/HUF/AOP/artificial juridical person) and the amount subject to TCS exceeds Rs. 50 lakh but does not exceed Rs. 1 crore, surcharge is 10 per cent of TCS. If it exceeds Rs. 1 crore but does not exceed Rs. 2 crore, surcharge is 15 per cent of TCS. If it exceeds Rs. 2 crore but does not exceed Rs. 5 crore, surcharge is 25 per cent of TCS. If it exceeds Rs. 5 crore, surcharge is 37 per cent (25 per cent under alternative tax regime) of TCS. If the purchaser/licensee/lessee is a non-resident firm and the amount subject to TCS exceeds Rs. 1 crore, surcharge is 12 per cent of TCS. If the purchaser/licensee/lessee is a non-resident co-operative society and the amount subject to TCS exceeds Rs. 1 crore but does not exceed Rs. 10 crore, surcharge is 7 per cent of TCS (it is 12 per cent of TCS if the amounts subject to TCS exceeds Rs. 10 crore). If the purchaser/licensee/lessee is a foreign company and the amount subject to TCS exceeds Rs. 1 crore but does not exceed Rs. 10 crore, surcharge is 2 per cent of TCS (it is 5 per cent of TCS if the amounts subject to TCS exceeds Rs. 10 crore).
- If deductee/collectee is a non-resident AOP (having only companies as its members), rate of surcharge cannot exceed 15%.
2. Amendment to Section 2(22)
Section 2(22) provides the definition of dividend for income tax purposes. It is inclusive definition. By virtue of this section, dividend includes the following payments or distributions by a company to its shareholders to the extent of accumulated profits of the company—
- any distribution entailing the release of the company’s assets [sec. 2(22)(a)];
- any distribution of debentures, debenture-stock, deposit certificates and bonus to preference shareholders [sec. 2(22)(b)];
- distribution on liquidation of the company [sec. 2(22)(c)];
- distribution on reduction of capital [sec. 2(22)(d)]; and
- any payment by way of advance or loan by a closely held company to a substantial shareholder or for the benefit of substantial shareholder.
Buy-back of shares – The above definition of dividend, inter alia, does not include any payment made by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 68 of the Companies Act, 2013. The amount received by a shareholder on account of buy-back of shares is exempt in his hands under section 10(34A). The company, making distribution for buy-back of shares, is required to pay tax on distributed income at the rate of 20 per cent (+ SC + HEC) under section 115QA.
Amendment – The aforesaid mode of taxation of buy-back payments has been modified. With effect from October 1, 2024, buy-back payment will be taxable in the hands of shareholders and the same will not be taxable under section 115QA. For this purpose, sub-clause (f) has been inserted to section 2(22). After this amendment, money received by a shareholder on account of buy-back of shares will be treated as deemed dividend and, consequently, it will be taxable under section 56(2)(i) under the head “Income from other sources”. No deduction will be allowed from such deemed dividend under section 57. The following points may be noted that:
- Amount received by a shareholder on account of buy-back will be deemed as dividend under section 2(22)(f) regardless of the quantum of “accumulated profits” of the distributing company.
- Section 8 has not been amended. Consequently, it is not clear whether (or not) deemed dividend under section 2(22)(f) will be taxable in the previous year in which buy-back is offered or in the year when it is actually paid.
- Section 46A has been amended.
- Tax will be deductible from buy-back payments within the parameters of section 194.
- The aforesaid amendment shall apply to any buy-back of shares that takes place on or after October 1, 2024.
3. Amendment to Section 10(4D)
Section 10(4D), inter alia, provides that any income accrued or arisen to, or received by a specified fund, shall not be included in computing the total income of a previous year subject to the conditions mentioned therein.
Amendment – The scope of section 10(4D) exemption has been expanded (with effect from the assessment year 2025-26). After this amendment, “specified fund” will also include a fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate, which has been granted a certificate as a retail scheme or an Exchange Traded Fund and is regulated under the International Financial Services Centres Authority (Fund Management) Regulations. However, the fund will have to satisfy such conditions as may be prescribed.
4. Income of Foreign Company from Lease Rental of Cruise Ships [Sec. 10(15B)]
Section 10(15B) has been inserted (with effect from the assessment year 2025-26) to provide exemption pertaining to income of a foreign company if the following conditions are satisfied:
- A foreign company gets lease rental (by whatever name called) of cruise ships from a specified company.
- Specified company operates ship or ships in India.
- The specified company which pays lease rental should be a non-domestic company which operates cruise ships in India and opts to pay tax within the parameters of section 44BBC.
- The foreign company and the specified company are the subsidiaries of the same holding company.
- Such income is received or accrues or arises in India for any assessment year up to the assessment year 2030-31.
What is “subsidiary company” – “Subsidiary company” or “subsidiary”, in relation to a holding company for the aforesaid purpose, means a company in which the holding company exercises or controls more than one-half of the total share capital either at its own or together with one or more of its subsidiary companies.
5. Amendment to Section 10(23EE)
Section 10(23EE) provides exemption to the specified income of Core Settlement Guarantee Fund (SGF), set up by a recognised clearing corporation in accordance with the regulations. Exemption is available in respect of Core SGF:
- Income by way of contribution received from specified persons [i.e., any recognised clearing corporation (which establishes and maintains the Core SGF), any recognised stock exchange (being a shareholder in such recognised clearing corporation or a contributor to the Core SGF); and any clearing member contributing to the Core SGF].
- Income by way of penalties imposed by the recognised clearing corporation and credited to the Core SGF.
- Income from investment made by the fund.
Where, however, any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part with the specified person, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is shared.
Amendment – The aforesaid provisions of section 10(23EE) have been amended (with effect from the assessment year 2025-26) to expand the definition of the expression “recognised clearing corporation” by including the recognised clearing corporation as defined in regulation 2(1)(n) of the International Financial Services Centres Authority (Market Infrastructure Institutions) Regulations, 2021 also within its scope. Further, the scope of term “regulations” has been extended by including the International Financial Services Centres Authority (Market Infrastructure Institutions) Regulations also within its scope.
6. Amendment to Section 10(23FB)
Section 10(23FB), inter alia, provides that any income of a venture capital company or venture capital fund from investment in a venture capital undertaking, shall not be included in computing the total income of a previous year.
Amendment – The provisions of section 10(23FB) have been amended (with effect from the assessment year 2025-26) to expand the scope of venture capital fund to include the venture capital fund referred to in regulation 18(2) of the International Financial Services Centres Authority (Fund Management) Regulations, 2022.
7. Amendment to Section 10(34A)
Amount received in respect of any buy-back of shares by a shareholder will not be exempt under section 10(34A) with effect from October 1, 2024.
- Rebate under section 87A is available in the case of a resident individual if his/her taxable income does not exceed Rs. 5,00,000.
- Rebate under section 87A is available in the case of a resident individual if his/her taxable income does not exceed Rs. 7,00,000.
- Where the total income of a “specified fund” [as referred to section 10(4D)] includes any income in respect of securities [as given under section 115AD(1)(a)], the rate of surcharge/health and education cess is
3a. Where the total income of a “specified fund” [as referred to section 10(4D)] includes any income in respect of securities [as given in section 115AD(1)(a)], the rate of surcharge/health and education cess is nil.
- “International Financial Services Centre” means an International Financial Services Centre which is set-up in a special economic zone and approved by the Central Government under section 18(1) of Special Economic Zones Act, 2005.
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