Tax Season 2024-25: What to Expect Amid Structural Changes

Tax experts and chartered accountants are bracing for a prolonged tax season for the fiscal year 2024-25 (Assessment year 2025-26) due to various structural and technical modifications affecting short-term and long-term capital tax. The late upload of many income tax return forms is expected to extend the filing process for both chartered accountants and taxpayers. In an effort to accommodate this complexity, the income tax department has extended the deadline for filing returns to September 15, up from the usual July 31 for FY 2024-25.

Extended Filing Timeline

The return filing may extend till the festive season, followed by the GST filing deadline of December 31. This is expected to be a busy tax season,” stated Sukrut Deo, a chartered accountant. Tax experts note that the calculation of short-term capital gains tax (STCG) and long-term capital gains (LTCG) tax has been impacted due to structural changes that took effect on July 23, 2024. Under the new rules, STCG incurred before this date will be taxed at a rate of 15%, while investments redeemed after this date will attract a tax rate of 20%.

Similarly, Long-term capital gains on mutual fund and stock investments realized before July 23, 2024, will be taxed at 10%, whereas gains realized after will incur a rate of 12.5%. Long-term gains on property will now be taxed at either 12.5% without indexation or at 20% with indexation benefits, depending on the taxpayer’s chosen option.

Changes in Tax Filing Requirements

The introduction of these new rules means that taxpayers must now split their capital gains into two periods: before and after July 23, 2024, necessitating different tax calculations and reporting formats. The forms now demand that capital gains be reported separately for these two periods,” explained Saee Sumant, a chartered accountant and assistant professor at MIT-WPU.

Over the past three to four years, the workload of tax professionals has increased significantly as major taxpayers have turned to investing in mutual funds and stocks. “It is an extremely time-consuming process with the amount of filing involved with LTCG and STCG to be done,” commented Pravesh Advani, a chartered accountant.

New Tools and Validation Guidelines

To help taxpayers accurately file their taxes, the income tax department has released revised tools and validation guidelines. These new validation rules are essential for identifying ‘Category-D’ faults that could lead to disallowances, along with ‘Category-A’ defects that prohibit return uploads, according to a tax consultant.

In a notable delay, the department uploaded the form ‘ITR-2‘ earlier this week, significantly later than the usual upload period of May. Additionally, experts indicated that ‘ITR-3’ was not uploaded properly.

Breakdown of ITR Forms

The various forms available for different income types are crucial for compliance:

For the last fiscal year 2023-24 (Assessment Year 2024-25), a total of 7.28 crore returns were filed. Of these, 45.77% were ‘ITR-1’ (3.34 crore), 14.93% were ‘ITR-2’ (1.09 crore), 12.50% were ‘ITR-3’ (91.10 lakh), 25.77% were ‘ITR-4’ (1.88 crore), and 1.03% were ‘ITR-5’ to ‘ITR-7’ (7.48 lakh), according to government data released earlier.

As taxpayers navigate these changes, it is essential to stay informed and prepared for a busy season ahead.

Radhika Goyal is Author of Taxconcept Gurugram head office, for deeply reported tax, gst and income tax articles on issues that matter. He splits her time between New Delhi and Bengaluru, and has worked...