On July 23, 2024, Finance Minister Nirmala Sitharaman presented the Union Budget for the financial year 2024–25. This budget, marking a historic third term for PM Modi’s government, reflects the Indian electorate’s trust and sets the economic trajectory for the nation. The Union Budget 2024 centers around four key themes: employment, skilling, MSMEs, and the middle class. It aims to empower the poor, farmers, youth, and women.
The budget identified nine priorities for generating ample growth opportunities:
Productivity and Resilience in Agriculture
Employment and Skilling
Social Justice & Inclusive Human Resource Development
Manufacturing and Service
Urban Development
Energy Security
Infrastructure
Innovation, Research & Development
Next Generation Reforms
Let’s discuss some of the major ones that have a direct impact on the Indian economy.
Direct Taxation – Corporate and Litigation
The corporate tax rate on foreign companies has been reduced from 40 to 35 percent.
The so-called angel tax for all classes of investors has been abolished to boost startups.
New Pension Scheme: A solution that protects the common citizen and maintains fiscal prudence will be formed.
The TDS rate on e-commerce operators is proposed to be reduced from 1 to 0.1 percent.
The two tax exemption regimes for charities are merged into one. The 5 percent TDS rate on various payments is being merged into the 2 percent TDS rate, and the 20 percent TDS rate on the repurchase of units by UTI or mutual funds is being withdrawn.
Short-term capital gains on certain financial assets shall attract a tax rate of 20% from 15%, while that on all other financial assets and all non-financial assets shall continue to attract the tax rates applicable.
Long-term capital gains on all financial and non-financial assets, on the other hand, will attract a tax rate of 12.5%, down from 20%.
The limit on exemption of capital gains on certain financial assets increased to ₹ 1.25 lakh per year, which aims to benefit the middle class.
Listed financial assets held for more than a year will be considered as long term, while unlisted financial assets and all non-financial assets have to be held for at least two years to be classified as long-term.
To improve social security benefits, the deduction of expenditure by employers towards NPS is to be increased from 10 to 14% of the employee’s salary. Deduction of this expenditure up to 14% of salary from the income of employees in public sector banks, private sector, public sector banks and undertakings, for the new tax regime, to be provided.
Income to companies from the buy-back of shares will be chargeable in the hands of the recipient investor as a dividend, instead of the current regime of additional income tax in the hands of the company.
Securities Transaction Tax (STT) on the sale of an option in securities increased from 0.0625% to 0.1% of the option premium, and on sale of a futures in securities, from 0.0125% to 0.02% of the price at which such futures will be traded.
Payments made by a firm to its partner in the nature of remuneration, commission, salary, bonus, interest, etc. will be subjected to TDS at the rate of 10% for aggregate amounts more than ₹ 20,000 in a financial year.
Equalisation Levy at the rate of 2% per cent of consideration received for e-commerce supply of goods or services, will no longer be applicable on or after 1st August, 2024.
Penalty on late furnishing of TDS or TCS statement beyond one month instead of the current period of 12 months.
Monetary limits for filing appeals related to direct taxes, excise, and service tax in the tax tribunals, high courts, and supreme court have been increased to ₹ 60 Lakh, ₹ 2 Crore, and ₹ 5 Crore from ₹ 50 Lakh, ₹ 1 Crore, and ₹ 2 Crore respectively.
Direct Taxation – Individual
In the new tax regime, the revised tax rate structure is as follows:
Income Slab
Tax Rates
0-3 lakh rupees
Nil
3-7 lakh rupees
5 per cent
7-10 lakh rupees
10 per cent
10-12 lakh rupees
15 per cent
12-15 lakh rupees
20 per cent
Above 15 lakh rupees
30 per cent
In new tax regime, the standard deduction for salaried employees increased from ₹50,000/- to ₹75,000/-.
Deduction on family pension for pensioners is to be enhanced from ₹ 15,000/- to ₹ 25,000/-.
Indirect Taxation- Custom Duty
Basic Custom Duty (BCD) on gold and silver has been reduced from earlier 10% to 6% and on platinum to 4%.
BCD on mobile equipment has now been reduced to 15%.
Indirect Taxation-GST
Existent GST rates have been maintained to ensure consistent business conditions.
Previously, different timelines existed for issuing assessment notices based on the type of taxpayer (regular, composition, etc.).The Union Budget 2024 standardizes the assessment notice timeline to 42 months from the due date of the annual return for all taxpayers.
Section 74A of the CGST Act: This new section establishes a timeline that is common from FY 2024-25 for the issuance of show-cause notices and adjudication, applicable to both fraud and non-fraud cases.
Amnesty Scheme: An amnesty scheme has been introduced offering a waiver of interest and penalties if taxes for the FY 2017-18 to 19-20 are paid in case of pending cases before the appellate authority, appellate tribunal, and High Court. This scheme provides relief to taxpayers who have pending liabilities from these years.
Extended ITC Availment Timeline: The deadline for availing Input tax credit (ITC) for the FY 2017-18 to 2020-21 has been extended to 31st November 2021.
Time of Supply Amendments: Amendments have been proposed to clarify the time of supply of services in cases where the invoice is to be issued by the recipient of services under the reverse change mechanism. This change aims to provide clarity and avoid disputes regarding the timing of tax liability.
Reduced Pre-Deposit Requirements: The maximum pre-deposit amount required for filing an appeal with the Appellate Authority is now set at 40 crore (CGST+SGST). Furthermore, the pre-deposit amount for filing an appeal with the Appellate Tribunal has been reduced from 20% (with a maximum of Rs. 50 crore ) to 10% (with a maximum of Rs. 20 crore) of central tax.
Employment
Nirmala Sitharaman introduced three employment-linked incentive schemes to boost job creation and support the workforce:
Scheme A: Direct Benefit Transfer (DBT) for First-Time Employees: First-time employees who register with the Employees’ Provident Fund Organization (EPFO) will receive a 1-month salaryin three installments, up to Rs 15,000.
Scheme B: Job Creation Incentives for Manufacturing: Both employees and employers will receive incentives based on their EPFO contributions during the first 4 years of employment.
Scheme C: Support to Employers: Employers will receive reimbursement of up to Rs 3,000 per monthfor 2 years toward their EPFO contribution for each additional employee.
5th scheme under the Prime Minister’s package aims to provide internship opportunities in 500 top companies to 1 crore youth in the age group 21-24 over a period of 5 years. Under this scheme, eligible youth receive a monthly allowance of ₹5,000 along with a one-time assistance of ₹6,000 through Corporate Social Responsibility (CSR) funds.
Other Factual Updates
India’s real GDP growth for FY 25 is projected to be between 5% – 7%, which is 20% higher than FY 20.
Inflation to move towards the 4% target.
Funds allocated to revamp Nalanda University in Bihar.
NPS Vatsalya: Contribution by parents and guardians for minors will be started.
For the resolution of income tax disputes, “Vivad Se Vishwas Scheme, 2024” has been launched.
Provision of ₹11,11,111 (3.4% of GDP) for infrastructure.
The government will facilitate an investment-grade energy audit for traditional micro and small industries in 60 clusters, including those involved in brass and ceramic production. Financial support will be provided to help these industries transition to cleaner forms of energy and implement energy-efficient measures.
Let’s see where the Union Budget 2024 takes us on the path towards economic growth. With the government’s focus on boosting employment opportunities and easing tax legislation, setting up businesses in India has become easier than ever.
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