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There is also a rebate u/s. 87A. This will effectively mean that
Thus, if a person’s total income is up to Companies will not carry out a buy-back
Rs. 7 lakhs and he has opted for the new anymore as the tax would be very onerous.
regime, he has to pay no Income-tax at all. It may as well declare a Dividend.
If the person’s income is, say, Rs. 15 lakhs
then he would have to pay Rs.1,40,000/-
on the first Rs.15 lakhs + surcharge + cess.
The rate of tax on income over Rs. 15 lakhs
would be 30% + surcharge + cess. Image courtesy: TheNewIndianExpress
If a person lets out residential property,
for example, on AIR-BNB basis as many
people are now doing or if a person has a
Paying Guest, then the income from such
letting will have to be offered for tax under
the head “Income from House Property”. One important feature of the Income-
Under this head, a deduction is allowed tax Act has been that if a person has any
for Property taxes and for 30% of the foreign asset, such as a Bank Account
net income after deducting Property tax. or shares etc. etc., then he is required to
Several people were offering this income declare such overseas assets in Schedule
for tax under the head “Income from FA (standing for “Foreign Assets”) in his
Other Sources” and claiming substantial Tax Return and if he has foreign income,
deductions in the case of a residential then he will have to fill in Schedule FSI
house. This will no longer be permitted. (which stands for Foreign Source Income).
Buy Back of Shares. Several Companies In the event one misses out declaring
have been carrying out a Buy-back this, no matter how small the penalty, the
of shares. When a Company has penalty is Rs. 10 lakhs per year and there
accumulated enough Reserves and does can be several other consequences. Now
not require so much money, it would try the Black Money Act is being amended
to release the same to its shareholders by to provide that if a person has Movable
way of a Buy-back of shares. This was Property of up to Rs 20 lakhs and if this
essentially because the rate of tax on such is not declared, there will be no penalty
buyback was 20% + surcharge @ 12% + cess under the Black Money Act. However,
@ 4% as against the amount of 30% (plus now penalty is not to be levied if Movable
surcharge and cess) on Dividend. Assets less more than Rs. 20 lakhs are not
Now this is to be amended w.e.f. 1st declared. Immovable Property will have to
October 2024. Thus, if a Company does a be declared no matter how small the value,
buy-back after that date, the entire amount and if it is not declared, a penalty will be
received by the shareholders will be taxed levied.
as Dividend . There are several other changes in
The second aspect of this is that the cost of relation to Reopening of Assessments etc.
the shares would be deemed to be a loss to Then, there are changes in TDS. If a
the shareholder and could be set off against person is a partner of a firm and draws a
other gains made by the shareholder. salary from the firm or earns Interest from
SENIORS TODAY | ISSUE #62 | AUGUST 2024 19
