The details provided in the new circular dated February 20, 2025 will apply when filing taxes for the financial year (FY) 2024-25 or assessment year (AY) 2025-26
The Central Board of Direct Taxes (CBDT) recently released a new circular specifying income tax deductions from salary under section 192 of the Income-tax Act, 1961. The same circular has also specified certain changes introduced through the finance acts of 2024 and 2023.
The details provided in the new circular dated February 20, 2025 will apply when filing taxes for financial year (FY) 2024-25 or assessment year (AY) 2025-26. The following are some highlights of the circular:
Form 16 modified: The circular has provided the modified Form 16 because of amendments in reporting other tax deductions and perquisites. The modified Form 16 for FY 2024-25 can be accessed here.
Form 24Q: This form now includes a new column (388A) for reporting other TDS/TCS deductions.
Taxation of salary and perquisites: The new circular has highlighted the following for taxation of salaries and perquisites.
- Salary definition: As per amendment in section 17 (1) of the Income-tax Act,1961 through Finance Act 2023, the term salary includes contribution made by the Central Government in the previous year to the Agniveer corpus Fund account of an individual enrolled in the Agnipath Scheme referred to in Section 80CCH.
- Perquisites: As per amendment through Finance Act, 2023 in section 17 (2), the perquisite would include the following:
- The value of rent-free accommodation provided to the employee by his employer
- The value of any accommodation provided to the assessee by his employer at a concessional rate.
Surcharge on income under the old tax regime
- The rate of surcharge is 10% of the amount of income tax when income is over ₹50 lakh but less than or equal to ₹1 crore (including income from dividends or certain capital gains)
- The rate of surcharge is 15% of the amount of income tax when income is over ₹1 crore but less than or equal to ₹2 crore (including income from dividends or certain capital gains).
- The rate of surcharge is 25% of the amount of income tax when income is over ₹2 crore but less than or equal to ₹5 crore (excluding income from dividends or certain capital gains)
- The rate of surcharge is 37% of the amount of income-tax when income is over ₹5 crore (excluding income from dividends or certain capital gains)
- The rate of surcharge is 15% of the amount of income tax when income is over ₹2 crore (including income from dividends or certain capital gains), not covered under points 3 and 4 above.
Tax slab and rates under the new regime
As per the amendment to the new tax regime under section 115BAC by Finance (No.2) Act, 2024, the tax slab and rates for FY 2024-25 or AY 2025-26 are the following:
| Total income | Rate of tax |
|---|---|
| Up to ₹3,00,000 | Nil |
| From ₹3,00,001 to ₹7,00,000 | 5 percent |
| From ₹7,00,001 to ₹10,00,000 | 10 percent |
| From ₹10,00,001 to ₹12,00,000 | 15 percent |
| From ₹12,00,001 to ₹15,00,000 | 20 percent |
| Above ₹15,00,000 | 30 percent |
Section 87 A rebate under the new regime
The circular has defined the revised provisions for rebate under section 87A in the new regime for FY 2024-25.
It says a tax rebate of up to ₹25,000 will apply when the total income of a taxpayer is not more than ₹7 lakh (computed before taking deductions into account).
The provision of marginal tax relief has also been mentioned in the circular for taxpayers whose income is slightly above the ₹7 lakh under the new regime.
Strict TDS rules
- Section 271C: If any person fails to deduct the whole or any part of tax at source or fails to pay or ensure payment of the whole or any part of the tax, he/she shall be liable to pay a penalty.
- Section 276B: Non-payment of deducted tax may result in an imprisonment of 3 months to 7 years and a fine.
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