Union Budget 2024-25: Key Highlights

Budget Day is a highly anticipated event in India, drawing significant interest from both businesses and the general public, eager to learn about the schemes and initiatives that could offer them benefits. It marks a pivotal moment for India's economic trajectory.

Finance Minister Nirmala Sitharaman unveiled the budget on July 23, 2024. This year's budget is centered on key areas such as employment, skill development, support for MSMEs, and the middle class.

The budget continues the momentum set by the interim budget towards a 'Viksit Bharat' by concentrating on the following nine priority segments to foster inclusive growth.

• 1. Productivity and Resilience in Agriculture
• 2. Employment and Skilling
• 3. Inclusive Human Resource Development and Social Justice
• 4. Manufacturing and Services
• 5. Urban Development
• 6. Energy Security
• 7. Infrastructure
• 8. Innovation, Research, and Development
• 9. Implementing Next Generation Reforms

The Finance Minister has outlined several changes to the tax code with the goal of simplifying the overall tax structure. These modifications include:

Income tax structure revised in new tax regime

Those opting for the new tax regime can save up to ?17,500 as per the revised tax structure. Furthermore, the standard deduction for salaried individuals increased from Rs. 50,000 to Rs. 75,000. Deduction on family pension for pensioners increased from Rs. 15,000 to Rs. 25,000.

Capital Gains Taxation

• Long term gains on all financial and nonfinancial assets to attract a tax rate of 12.5%.
• Short term gains of financial assets to attract 20% tax rate.
• Increase in limit of exemption of capital gains on financial assets to Rs. 1.25 lakh per year from Rs. 1 lakh per year.
• There will be only two holding periods: 12 months for all listed securities and 24 months for other assets.

Securities Transaction Tax (STT)

To curb risky Futures and Options (F&O) trading by retail investors, the STT on these trades will be raised. STT on futures will rise from 0.0125% to 0.02% and on options from 0.0625% to 0.1%.

Corporate Tax

In an effort to draw in more foreign investment to support India's developmental goals, the government will lower the corporate tax rate for foreign companies from 40% to 35%.

Angel Tax

To provide a more conducive atmosphere for startups, the government will completely abolish the angel tax for all investor categories.

Share Buy-backs

Income from share buybacks will be taxed as dividend income for shareholders, against the current regime where an extra income tax is imposed on the company. Furthermore, the cost of these shares will be treated as a capital loss for the investor. The buyback tax was initially introduced in 2013 for unlisted companies and expanded to include listed companies in 2019.

Tax deducted at source (TDS) and Tax collected at source (TCS)

The TDS rate for e-commerce operators will drop from 1% to 0.1%. TCS credit will be allowed as a set-off against TDS on salaries. The Finance Bill aims to simplify tax rules for charities, TDS rates, reassessment procedures, search operations, and capital gains taxation.

TDS filing

The Union Budget 2024 removes the criminal liability for delayed TDS payments made before the statement filing deadline. The government will establish clear guidelines for TDS defaults and simplify the calculation of penalties. Taxation of Mutual Funds (For Residents and Non-Residents)

ProductBefore July 23, 2024After July 23, 2024Holding PeriodSTCG TaxLTCG TaxHolding PeriodSTCG TaxLTCG TaxEquity oriented Mutual Fund>12 months15.00%10.00%>12 months20.00%12.50%Specified Mutual Funds# which has more than 65% in debtNASlab RateSlab Rate*NASlab RateSlab Rate*Equity FOFsNASlab RateSlab Rate>24 monthsSlab Rate12.50%Overseas FoFNASlab RateSlab Rate>24 monthsSlab Rate12.50%Gold Mutual fundsNASlab RateSlab Rate>24 monthsSlab Rate12.50%

# Definition of Specified Mutual Fund schemes has been revised as: a) MF scheme investing more than 65% in debt and money market instruments; and b) FOF investing 65% or more in MF scheme mentioned in (a) above. * Gains on Specified Mutual Funds which have more than 65% in Debt will always be treated as STCG.

Conclusion

The Union Budget 2024-25 has been widely seen as a budget that focuses on economic growth and development, with a strong emphasis on creating jobs and boosting the economy. With substantial investments in infrastructure, healthcare, education, and digital innovation, the budget aims to drive inclusive development and fortify India's position as a global economic powerhouse.Source: Union Budget 2024-25