Budget 2024: Key Tax Highlights

Budget Day is an eagerly anticipated event in India, and this year, Budget 2024 has introduced several significant changes in the realm of taxation, announced by the Finance Minister on 23rd July 2024. Here are the key tax highlights:

1. Direct Tax Proposals

• Enhanced Standard Deduction and Family Pension Deduction: Under the new regime, the standard deduction for salaried individuals has been increased to ?75,000 from ?50,000. The deduction on family pension has been increased to ?25,000 from ?15,000 for those filing taxes under the new regime.

• Revised Tax Structure: The new tax regime's income tax slabs and rates have been adjusted as follows:

0-3 lacs - NIL

3-7 lacs - 5%

7-10 lacs - 10%

10-12 lacs - 15%

12-15 lacs - 20%

More than 15 lacs -30%

This change allows a salaried employee to save up to ?17,500 in taxes.

• Simplification of Capital Gains Taxation: For classifying assets into long-term and short-term, only two holding periods will be used: 12 months and 24 months. All listed securities held for over 12 months are considered long-term. For unlisted bonds and debentures, short-term gains will be taxed at applicable slab rates, aligning with debt mutual funds and market-linked debentures.

• Changes in TDS Rates: The Budget reduced TDS rates on specified payments to facilitate business and improve taxpayer compliance, effective either after 1st October 2024 or 1st April 2025. Notable changes include:

Payment of insurance commission (Section 194D): 5% to 2%

Payment in respect of life insurance policy (Section 194DA): 5% to 2%

Commission on sale of lottery tickets (Section 194G): 5% to 2%

Payment of rent by certain individuals or HUF (Section 194-IB): 5% to 2%

Payment on account of repurchase of units by mutual funds or UTI (Section 194F): Proposed to be omitted

• Introduction of TDS on Payments to Partners by Firms (Section 194T): Payments exceeding ?20,000 by firms to partners as salary, remuneration, interest, bonus, or commission will be subject to TDS at 10%.

• Abolishment of Angel Tax: The Angel tax provision under Section 56(2)(viib) has been proposed to be removed, benefiting the startup ecosystem by easing fundraising compliance.

• Corporate Taxes on Foreign Companies: The corporate tax on foreign companies has been reduced from 40% to 35%.

• Increased Deduction on Employer's Contribution to Pension Scheme: The deduction limit for the employer's contribution to the Pension scheme has been increased to 14% of the employee's salary.

• STT on Futures and Options: The Securities Transaction Tax (STT) on futures has been increased from 0.0125% to 0.02% and on options from 0.0625% to 0.1%.

• Real Estate Long-Term Capital Gains (LTCG): The LTCG tax on real estate has been reduced to 12.5%, with the removal of the indexation benefit. This change aims to simplify and encourage real estate transactions.

2. Indirect Tax Proposals

• Customs Duties Reductions and Exemptions: Several critical goods have seen customs duty reductions, including mobile phones, gold, silver, and cancer drugs. Specific reductions include:

• Mobile phone, mobile PCBA, and chargers: From 20% to 15%
• Gold and silver: From 15% to 6%
• Platinum: From 15.4% to 6.4%
• Broodstock, polychaete worms, shrimp, and fish feed: From 10%, 30%, and 15% to 5%

• Major GST Reforms and Amendments: Significant changes include keeping un-denatured Extra Neutral Alcohol out of GST purview, introducing Section 74A to determine unpaid or short-paid taxes, and several procedural updates to improve compliance and taxpayer experience.

Conclusion:

The 2024 Budget has introduced a range of measures aimed at simplifying tax structures, promoting compliance, and supporting economic growth. These changes reflect a concerted effort to create a more efficient and taxpayer-friendly system.

For a detailed understanding and to download the Finance Bill 2024 and Budget 2024 speech, click on the links provided.

Finance Bill 2024

Budget 2024