Introduction: In the recent Interim Budget speech for the fiscal year 2024-2025, Finance Minister Nirmala Sitharaman outlined significant achievements in both direct and indirect tax sectors over the past decade. The budget showcased a robust growth in direct tax collections, accompanied by a noteworthy expansion in the number of return filers. The Finance Minister acknowledged the vital role played by taxpayers in the nation’s development and assured them that their contributions have been utilized judiciously.
Direct Taxes:
1. Tripling of Direct Tax Collections: Over the past ten years, direct tax collections have witnessed an impressive threefold increase, reflecting a positive trend in the nation’s economic growth.
2. Tax Rate Rationalization: The government has taken proactive measures to reduce and rationalize tax rates, aiming to provide relief to taxpayers. The new tax scheme ensures no tax liability for individuals with income up to ₹7 lakh, a significant increase from ₹2.2 lakh in the financial year 2013-14.
3. Presumptive Taxation Thresholds: Thresholds for presumptive taxation for retail businesses and professionals have been raised, promoting ease of doing business. Corporate tax rates have also been slashed, benefitting both existing domestic companies and new manufacturing entities.
4. Enhanced Taxpayer Services: The government’s focus over the last five years has been on improving taxpayer services. The introduction of Faceless Assessment and Appeal has transformed the age-old jurisdiction-based assessment system, ensuring greater efficiency, transparency, and accountability. Additionally, updates in income tax returns and the introduction of a new Form 26AS have simplified the filing process, reducing the average processing time from 93 days in 2013-14 to just ten days.
Indirect Taxes:
1. GST’s Impact: The implementation of the Goods and Services Tax (GST) has unified India’s indirect tax regime, reducing the compliance burden on trade and industry. According to a leading consulting firm’s survey, 94 percent of industry leaders view the transition to GST as largely positive.
2. GST’s Positive Outcomes: The GST has led to supply chain optimization, with the elimination of tax arbitrage and octroi resulting in the dismantling of check posts at state and city boundaries. The tax base of GST has more than doubled, and the average monthly gross GST collection has nearly doubled to ₹1.66 lakh crore.
3. Customs Facilitation: Several measures have been taken in Customs to facilitate international trade, resulting in a significant reduction in import release time at Inland Container Depots, air cargo complexes, and sea ports.
Tax Proposals:
1. Continuity in Taxation: In line with convention, the Finance Minister proposed to retain the existing tax rates for both direct and indirect taxes, including import duties. However, certain tax benefits for start-ups and investments made by sovereign wealth or pension funds, along with tax exemptions for specific income of International Financial Services Centre (IFSC) units, are set to expire on March 31, 2024. The Minister proposes to extend these benefits until March 31, 2025, ensuring continuity in taxation.
2. Taxpayer Services Enhancement: A notable announcement aimed at improving ease of living and ease of doing business is the withdrawal of outstanding direct tax demands. Demands up to ₹25,000 pertaining to the period up to the financial year 2009-10 and up to ₹10,000 for financial years 2010-11 to 2014-15 will be withdrawn. This move is expected to benefit approximately a crore taxpayers, addressing long-standing concerns and facilitating faster refunds.
There are a large number of tax demands which are pending, numbering to around 2.68 crore demands, amounting to a total of Rs. 35 lakh crores However, about 2.1 crore of 2.68 crore demands are valued less than Rs. 25,000, and many of these are very very old, some of them dating back to 1962; many of them are unreconciled due to systemic issues Out of 2.1 crore tax demands, about 58 lakh demand entries are for the period pertaining up to 2009-10 and another 53 lakh demands are for the period from 2010-11 onwards. So, the total amount remitted is less than Rs. 3,500 crores – Revenue Secretary, Shri Sanjay Malhotra
Conclusion:
The Interim Budget for 2024-2025 reflects the government’s commitment to fostering a taxpayer-friendly environment while promoting economic growth. The measures outlined in the budget, such as tax rate rationalization, enhanced taxpayer services, and the extension of tax benefits, are expected to further strengthen the nation’s economy and boost the confidence of taxpayers.
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