Investing options are also likely to widen after the market regulator, the Securities and Exchange Board of India (Sebi), created a new category – Specialized Investment Funds (SIFs). The regulator also made changes to protect investor interests from mis-selling of new fund offers, enabling one-stop access to investments via DigiLocker, and the creation of a platform to trace unclaimed investments.
These changes take effect in the new financial year. Here are some of the key changes you should be aware of as the new financial year kicks in.
New tax slabs
The new tax regime has some major changes in terms of slabs, which make it more appealing than the old regime for several taxpayers. Here’s how it breaks down:
No tax on income up to ₹4 lakh, 5% on ₹4 lakh to ₹8 lakh, 10% on income from ₹8 lakh to ₹12 lakh, and 15% on income from ₹12 lakh to ₹ ₹16 lakh. Income from ₹16 lakh to ₹20 lakh will be taxed at 20%, income from ₹20 lakh to ₹24 lakh will be taxed at 25%, and anything above ₹24 lakh per year will be taxed at 30%.
If you make up to ₹12.75 lakh per year, you get a tax break in the new regime. For those earning up to ₹12 lakh, the ₹60,000 tax liability will be set off by an equal amount of rebate.
The standard deduction for the new financial year has been increased to ₹75,000 in the new tax regime. Hence, those with income up to ₹12.75 lakh will also be exempted from tax in the new tax regime.
“Despite the relaxations under the new tax regime, if you have substantial deductions and exemptions under the old tax regime, you might still be better off with the old tax regime,” pointed out Mumbai-based chartered accountant Nitesh Buddhadev. “This will vary from case to case, depending on the individual’s total income and the tax deductions he or she is eligible for.”
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Tax collected at source
On overseas transactions, if the Liberalised Remittance Scheme (LRS) transfer exceeds ₹10 lakh in a financial year for general purposes, tax collected at source (TCS) of 20% is applicable. Previously, LRS exceeding ₹7 lakh attracted TCS.
There won’t be any TCS on remittances made out of loans for educational purposes.
“However, on other education and medical remittances, 5% TCS would still continue, though with the increased ₹10 lakh threshold,” said Naisar Shah, director at PR Bhuta & Co., a chartered accountancy firm in Mumbai.
TCS, TDS corrections
Corrections in tax deducted at source (TDS) and TCS statements will be allowed for up to six years from the end of the financial year in which the original statement was filed.
For Q1 (April-June), Q2 (July-September) and Q3 (October-December), corrections can be made within six subsequent financial years. For Q4 (January-March), corrections can be filed within six subsequent financial years plus one additional year as the filing due date for Q4 falls in the subsequent financial year.
This new six-year window was announced in Budget 2024, which will be available from 1 April 2025. A one-time correction window has been granted for statements pertaining to financial years 2007-08 to 2018-19, with the cut-off of 31 March 2025.
“As there was no specified time limit for submitting TDS correction statements, this provision was vulnerable to erroneous refund claims and harassment of deductees. The introduction of a six-year time limit for correcting TDS and TCS statements aims to curb any misuse,” said Harshal Bhuta, a partner at PR Bhuta & Co.
Self-occupied property
Previously, two properties could be declared as self-occupied for nil tax only if the owner couldn’t live there for work, business, or professional reasons. Starting 1 April, two properties can be declared as self-occupied for nil taxation, regardless of the reason the owner has for not living there.
“This proposal benefits taxpayers by only requiring proof that the property is not let out and it is not required to prove that the owner could not occupy it due to employment, business, or profession in a different location,” said Prakash Hegde, a Bengaluru-based chartered accountant.
Timeline to update ITR
The timeline to file an updated income tax return has been increased to four years from two years, from 1 April. However, additional tax of 60% and 70% is payable if the return is filed between 24-36 months and 36-48 months, respectively, from the end of the concerned assessment year.
If filed before 12 months from the end of the assessment year, the additional tax payable is 25%, and if filed after 12 months but before 24 months, it is 50%.
New fund offers
From 1 April, funds must be deployed within 30 business days of the date of unit allotment of a new fund offer (NFO). If the fund house fails to meet this deadline, it can seek a one-time extension of 30 additional business days—but only if the mutual fund’s investment committee approves it after reviewing the reasons for the delay.
If the funds remain undeployed even after 60 business days, fund houses will be required to stop accepting fresh inflows into the scheme until the funds are fully deployed. Also, the fund house will have to allow investors to exit without any exit load.
To curb mis-selling of NFOs by distributors for commissions, new rules say that when switching from an existing fund to an NFO, the commission rate of the lower-commission scheme will be considered.
DigiLocker
Users of DigiLocker, a government platform for storing, accessing and sharing official documents in paperless form, will be able to fetch and store their statements of holdings for shares and mutual fund units from their demat accounts, along with their consolidated account statement (CAS).
This will expand DigiLocker services, which already include bank account statements, insurance policy certificates, and National Pension System account statements.
MF Mitra
A platform – MITRA (Mutual Fund Investment Tracing and Retrieval Assistant) — will be developed and launched by mutual fund registrar and transfer agents to provide investors with a searchable database to find their inactive and unclaimed mutual fund folios.
It will enable investors to identify investments made by any other person for which he or she may be the rightful legal claimant. It will also encourage investors to comply with KYC (Know Your Customer) obligations to reduce the number of non-KYC compliant folios.
Specialized Investment Funds
The regulatory framework for SIFs will become effective from 1 April, enabling a new category of investment products positioned between mutual funds (MFs) and portfolio management services.
SIFs will offer investors more sophisticated investment strategies, which MFs can’t under current regulations. The minimum investment in SIFs is ₹10 lakh.
Asset management companies are expected to launch funds in this new regulatory framework in the new financial year.
NPS Vatsalya
The children’s welfare scheme — NPS Vatsalya Scheme — will offer the same tax benefits as the National Pension System (NPS). The parent or guardian contributing to the NPS Vatsalya account can claim deductions on such amounts, subject to a maximum of ₹50,000. This deduction is available only in the old tax regime.
Senior citizens
To give relief to senior citizens who depend on interest income for their retirement, the threshold for TDS has been increased from ₹50,000 to ₹1 lakh. Additionally, National Savings Scheme withdrawals on or after 29 August 2024 will be exempt from tax as no interest is payable on such accounts.
