Budget 2024: Highlights of Income Tax & GST Proposals and their implications

Finance (No.2) Bill, 2024 – Highlights of Direct Taxes and GST Proposals and their implications

The Finance (No.2) Bill, 2024, introduced by Finance Minister Smt. Nirmala Sitharaman on July 23, 2024, outlines significant changes in direct taxes and GST for the Union Budget 2024-2025. Aimed at bolstering economic growth, job creation, and fiscal consolidation, this bill incorporates various reforms designed to enhance tax certainty, widen the tax base, and reduce litigation. Key highlights include adjustments to personal and corporate tax rates, amendments to capital gains taxation, and updates on GST compliance. This article delves into the major proposals and their potential impacts on taxpayers and businesses.

UNION BUDGET 2024-2025

HIGHLIGHTS OF THE FINANCE (NO.2) BILL, 2024

The Finance Minister Smt. Nirmala Sitharaman, delivered her seventh consecutive Union Budget on 23^rd July 2024; laying down the roadmap to make India Viksit Bharat which bore imprint of walk the talk on fiscal consolidation, policy continuity and indicating focus of the Government on high growth, employment creation and inclusive development.

The Budget has targeted efforts towards agricultural productivity, MSME’s and Startup’s, skilling and job creation, education, infrastructure, ease of doing business and developing green, clean and environmentally sustainable economy, to name a few. In doing so, steps are being taken to ensure that interests of rural and middleclass are being taken care of.

The taxation proposals are aimed at ensuring tax certainty, reducing litigation, widening tax base and enhancing revenues to fund the development and welfare schemes of the Government.

With the aim of reforming the taxation framework, a comprehensive review of the Income Tax Act, 1961 is planned in the near future.

As in the earlier years, we have made humble attempt to lucidly present in the following paragraphs; our analysis of some of the salient tax proposals, to enable you to grasp them easily.

As of date, these are proposals only, and if adopted by the Parliament and passed as Finance Act; will come into force for and from Assessment Year 2025-2026 relevant to Financial Year 2024-2025, unless specifically provided otherwise.

I. DIRECT TAXES

Amendments proposed under the Income-tax Act, 1961 (hereafter referred to as “the Act”).

1. Rates of Tax unchanged under Old Regime, New Regime made more attractive and reduced rate for Foreign companies:

For all the Assessees (except foreign companies), the Finance Minister has maintained status quo (under Old Regime), with respect to basic tax rates, Surcharge and Health and Education Cess, basis the last year.

To attract foreign companies to increase their presence in India, through permanent establishment/ place of business in India; the Finance Minister has proposed reduce the Corporate tax rate from 40% to 35% plus applicable Surcharge and Cess.

Further, in order to have majority of Individual’s/ HUF’s shift to the New Regime, the following changes are proposed:

> Standard Deduction increased to Rs.75,000/- from Rs.50,000/-;

> Deduction in respect of Family pension increased to Rs. 25,000/- from Rs.15,000/-; and

> Exemption for employer’s contribution to National Pension Scheme increased 14% from 10% (non-Government employee).

There apart, the slab rates are modified, and the comparative proposed rates vis-à-vis the existing one is given in below table:

Basic exemption and Income Slabs
Financial Year 2023-24		Financial Year 2024-25
Total Income	Tax Rate	Total Income	Tax Rate
upto Rs.3,00,000/-	Nil	upto Rs.3,00,000/-	Nil
Rs.3,00,001/- to Rs.6,00,000/-	5%	Rs.3,00,001/- to Rs.6,00,000/-	5%
Rs.6,00,001/- to Rs.7,00,000/-	10%	Rs.6,00,001/- to Rs.7,00,000/-	5%
Rs.7,00,001/- to Rs.9,00,000/-	10%	Rs.7,00,001/- to Rs.9,00,000/-	10%
Rs.9,00,001/- to Rs.10,00,000/-	15%	Rs.9,00,001/- to Rs.10,00,000/-	10%
Rs.10,00,001/- to Rs.12,00,000/-	15%	Rs.10,00,001/- to Rs.12,00,000/-	15%
Rs.12,00,001/- to Rs. 15,00,000/-	20%	Rs.12,00,001/- to Rs. 15,00,000/-	20%
Above Rs.15,00,001/-	30%	Above Rs.15,00,001/-	30%

Accordingly, salaries taxpayers having income upto Rs.7,75,000/- would be tax free and for individual having aggregate income of Rs.10,00,000/-, there would be savings of Rs.17,500/-.

There apart no change is proposed in the rates of tax and Surcharge for Companies (other than Foreign Companies), firms, LLP’s, and Co-operative societies.

2. Increasing Deduction for Employers contribution to New Pension Scheme to 14% from 10%-welcome step:

In order to promote higher retirement savings and improve the social security benefits, the Finance Minister has proposed to increase the limit for deduction available to employers on contribution to NPS from employee salary to 14% from the existing 10%.

3. Payments made to settle contravention not deductible as business expenditure:

With a view to further clarify the legislative intent and dissuade taxpayers from claiming expenses, as being incurred for purpose of business, which is otherwise not permissible; the Finance Minister has proposed amendment in Section 37 to provide that expenditure incurred to settle proceedings initiated related to contravention of any law, would not be allowed as deductible.

4. Increase in limits Remuneration payable to Working Partners:

Considering the fact that current limits in Section 40(b) of the Act for computing deduction in respect of remuneration payable to working partners were last revised in 2009 (w.e.f. AY 2010-11), the Finance Minister has proposed new limits with comparative of existing limits, as under:

Existing		Proposed
Book Profit	Allowable Remuneration	Book Profit	Allowable Remuneration
on the first Rs.3,00,000 or in case of a loss	Rs.1,50,000 or at the rate of 90%, whichever is more	on the first Rs.6,00,000 or in case of a loss	Rs.3,00,000 or at the rate of 90%, whichever is more
on the balance amount	at the rate of 60 per cent	on the balance amount	at the rate of 60 per cent

5. Angel Tax abolished-Much needed relief for Start-ups and others:

With the aim of spurring investments in startups, and to alleviate the funding crisis faced by the sector post introduction of the levy introduced in 2012 (applicable when a private company issues shares at premium above fair value); the Finance Minister has proposed to do away with the provisions of Section 56(2)(vii)(b) of the Act, effective from Assessment Year 2025-26.

Having regard to the approach of the NDA Government to provide certainty to taxpayers and reduce litigation, we wonder why such abolition of Angel Tax is not done retrospectively; as this move would not only provide clarity for future periods but would also have gone a long way in taking away pains faced by taxpayers for the past period.

As regards dealing with past litigation on this issue, taxpayers can consider to apply the settled principle that amendments to remove hardships faced by assesses ought to be applied retrospectively by using the ratio of Supreme Court in cases of M/s. Calcutta Export Company (302 CTR 201), Alom Extrusions Ltd. (319 ITR 316) etc. and make appropriate submissions in pending matters.

6. Clarity on characterization of income from letting of residential houses as House Property income:

Hitherto, income from rental of residential houses on short term basis could have been treated as Business Income wherein claim of expenses incurred in connection with the property was permissible.

With a view to bring clarity on characterization of income from letting of residential houses and avoid claim of any other deductions other than those permitted under Income from House Property; the Finance Minister has proposed suitable amendment.

This amendment is also likely to impact builders/ developers who obtain rental income from unsold flats as such income can no longer be set-off against business expenses.

7. Overhaul of Capital Gains Taxation-Simplification and deepening of tax base:

In order to simplify the existing regime of Capital Gains taxation, the Finance Minister has proposed the following Three changes (w.e.f. 23^rd July, 2024):

> Only Two Holding periods (12 months or 24 months) to determine Long Term or Short-Term-refer Table below for details;

> Short-Term Capital Gain on listed equity shares, equity Mutual Funds and units of Business Trust (subject to STT) to be taxed at 20% instead of current 15%;

Long-Term Capital Gain to be taxed at 12.5% for all class of assets; and

> Benefit of Indexation for Long Term Capital Gains removed; and

> Threshold exemption of Long-Term Capital Gain from listed securities (subject to STT) increased to Rs.1,25,000/- from Rs.1,00,000/-.

The above rates would be applicable for both residents and non-residents.

Proposed Holding period of assets to qualify as Long-Term Capital Asset, vis-à-vis current provisions:

Type of asset	Period of Holding (Existing)	Period of Holding (Proposed)
Listed securities (shares, bonds, debentures, REIT, INVIT)	12 months	12 months
Equity oriented Mutual Funds	12 months	12 months
Unlisted shares and immovable property	24 months	24 months
Unlisted bonds and debentures, Market linked debentures (‘MLD’) and Debt Mutual Funds	36 months for Unlisted bonds and debentures and Debt Mutual Funds. MLD’s were taxed as Short-Term Capital Gain, at slab rates.	Not Applicable, as it would be taxed as Short-Term Capital Gain, at slab rates
Other Capital Assets	36 months	24 months

 The benefit of substitution of fair value of as on 1^st April, 2001 for immovable properties acquired before that date would continue to be available.

(This amendment will take effect from 23^rd July, 2024)

8. Gift of Capital Assets by non-Individual/ HUF to be treated as Taxable Transfer-Plugging loophole:

With the objective to curb tax avoidance on the plea that gift by corporates is not subject to Capital Gains taxation and to put at rest the controversy as to validity of gift made by artificial person and litigation related thereto; the Finance Minister has proposed that transfer of capital assets under gift, will or irrevocable trust by person other than individual or HUF, would be subject taxation.

9. Much need clarity on cost of acquisition in case of shares transferred in Initial Public Offering-welcome move:

To correct the anomaly caused in computation of Capital Gains arising on transfer of shares under Offer for Sale included in Initial Public Offering (‘IPO’) on which STT could not be paid on acquisition, the Finance Minister has proposed amendment so as to provide that for computation of Capital Gains u/s.112A of the Act, the cost of acquisition of shares shall be determined applying indexation benefit upto Financial Year 2017-18.

(The above amendment is proposed to be applied retrospectively w.e.f. Assessment year 2018-19 onwards)

10. Burden of Taxation on Buyback of shares shifted back to shareholders-New Regime introduced:

With the objective of widening the tax base, and bringing parity on taxation of incomes distribution from companies-at level of recipients; the Finance Minister has proposed new regime for taxation of income arising on buyback of shares of domestic companies, salient features of which are stated hereunder:

> Amounts received from company on buyback of shares treated as Dividend in hands of shareholder;

> No deduction of expenses allowed to shareholder from such Dividend;

> The cost of acquisition of shares bought back to be allowed as ‘capital loss’ in the hands of the shareholder;

> Buyback proceeds paid to Residents subject to TDS @10%; and for Non-Residents TDS would continue as per Section 195 of the Act.

> No Buyback Tax payable by company.

The New Regime of taxation of Buyback of shares is likely to have following repercussions for shareholders:

• Higher rate of taxation of Dividend income (at slab rates) whereas adjustment on account of Capital Loss would be granted at 12.5% or 20% (depending on holding of shares);
• In case taxpayer does not have sufficient Capital Gain Income in same year, the set-off of Capital Loss would be pushed to subsequent year/ period;
• In case the shares bought back are Long Term Capital Asset, then the Capital Loss would be treated as Long Term Capital Loss which can only be set-off against Long Term Capital Gain;
• To claim carry forward of Capital Loss to subsequent years, filing of return within the prescribed time, is mandatory.
• Tax burden on buyback of shares would now be borne only by participating shareholders.

The above amendment is proposed to be applied on buyback of shares on or after 1^st October, 2024.

However, we await clarity as to what would be the relevant date which would be considered for applicability of the New Regime on buybacks to be announced post Budget Speech upto 30^th September, 2024-date of announcement of buyback offer, date of acceptance of shares, or date of receipt of buyback consideration by shareholder etc.

Before deciding to participate in any buyback offer or not, it would be advisable to make comparison of likely tax liability on direct sale of shares vis-à-vis tax payable on buyback.

The proposal to allow set-off of Capital Loss on buyback may force investors to do transactions to generate Capital Gain, in case of persons who do not regularly have such transactions.

11. Changes in provisions related to Re-opening/ Re-assessment-To provide certainty to taxpayers:

In order to simplify the existing provisions related to re-opening/ re-assessment of cases, the Finance Minister has proposed new procedure, the features of which are summarized below:

• No requirement of conducting inquiry before issuance of notice u/s.148 of Act;
• Return of Income u/s.148 to be filed within Three months-no extension permitted;
• Scope of ‘information’ expanded and it would include information emanating from survey.
• Process of approval simplified;
• Search cases excluded, where search initiated on or after 1^st September, 2024.

The new time-limits for issuance of notices u/s.148 or u/s.148A are stated in below table:

Particulars	Notice u/s.148A	Notice u/s.148
Income escapement upto Rs.50 Lakhs	3 years from end of relevant AY	3 years and 3 months from end of relevant AY
Income escapement above Rs.50 Lakhs	5 years from end of relevant AY	5 years and 3 months from end of relevant AY, if: Assessing Officer possess books of account, document or evidence related to asset, expense, transaction or entry showing income escapement.

12. Increase in period of withholding of refunds due by the Department and taxpayer not eligible for Additional Interest u/s.244(1A):

The Finance Minister has proposed to increase the period of withholding of refund due to Assessee, upto 60 days following completion of assessment which hitherto was till completion of assessment.

There apart, it is provided that the Assessee would not be eligible for additional Interest u/s.244A(1A) of the Act, for such period of refund withholding by the Department.

(This amendment will take effect from 1^st October, 2024)

13. Increase in Monetary Threshold for filing Departmental appeals to ITAT, High Court and Supreme Court:

With the objective of reducing overall litigation in terms of appeals preferred by the Department at various for a, the Finance Minister has further enhanced the monetary limits, as under:

> Appeals to ITAT to be filed for matters involving tax effect above Rs.60 Lakhs (currently Rs.50 Lakhs);

> Appeals to High Court to be filed for matters involving tax effect above Rs.2 Crores (currently Rs.1 Crores);

> Appeals to Supreme Court to be filed for matters involving tax effect above Rs.5 Crores (currently Rs.2 Crores).

The aforesaid limits are taken from the Budget Speech and subsequent Circular for the same is likely to be issued in due course.

14. More Tax incentives for units located in International Financial Services Centre:

To further promote the units set-up in International Financial Services Centre and to make it global hub for financial services, the following incentives are proposed by the Finance Minister:

• Definition of Specified Fund (which has been granted certain exemptions on gains derived from transfer of certain capital assets) has been expanded to include funds, which have been granted a certificate as a Retail Scheme, or an Exchange Traded Fund regulated under the IFSC (Fund Management) Regulations, 2022.
• Interest and dividend income received by Specified Funds shall be exempt from levy of surcharge.
• No restriction on deductibility of interest expenses paid by Finance companies in IFSC to its associated enterprise.
• Specified income of Core Settlement Guarantee Funds set up by recognized clearing corporations in IFSC to be exempted.
• The source of cash credits received from Venture Capital Funds in IFSC is not required to be explained.
• The ‘thin-capitalization’ provisions with respect to restriction on deductibility of interest expense are relaxed for a Finance Company located in IFSC which meets the prescribed conditions.

15. Rationalization of the provisions of Charitable Trust/Institution-Single regime to govern charities:

In the last few Budgets, the lot of amendments were made related to charitable trusts/ institutions registered u/s.10(23C), u/s.12AA/12AB of the Act to ensure proper monitoring of such entities, bring consistency in application of provisions of the Act and bring clarity wherever required.

To further rationalize the provisions, the Finance Minister has now proposed to merge existing Two regimes into a single one i.e. Section 11 for taxation of charitable entities. The highlights are stated below:

• Existing charitable institutions approved u/s.10(23C) regime, shall be governed by existing provisions of section 10(23C) until the validity of such approval.
• Charitable Institutions are permitted to file application for approval u/s.10(23C) until 30^th September, 2024.
• Effective from 1^st October, 2024 fresh registration / renewal to be granted only u/s.11 regime.
• List of permissible investments u/s.11(5) expanded to bring it in line with the investments permissible u/s. 10(23C).

16. Merger of approved charitable entities-welcome move:

With the object of promoting merger of charitable entities having similar objects, the Finance Minister has proposed to provide that subject to fulfillment of conditions (to be prescribed), the provisions of Chapter XII-EB of the Act (referred to as ‘Exit Tax’) would not be applicable.

17. Changes in Time limits for completion of assessment/ re-assessment/ fresh assessment:

Following procedural amendments are proposed by the Finance Minister with respect to assessment/ reassessment proceedings/ fresh assessment:

• The time limit for completing assessment of returns filed as per CBDT Order is 12 months from the end of Financial Year in which return is filed.
• The time limit for completing fresh of cases set-aside by CIT(A) is 12 months from the end of Financial Year in which Order is passed by CIT(A).
• In cases of annulment of block assessments, the time limit is one year from the end of the month of revival or within the period specified in u/s.153B(1), whichever is later.
• In cases of search where books of account/ documents/ seized materials are transferred to Assessing Officer having jurisdiction over another assessee; if after exclusion of specified period, the date of limitation is before the end of month, then period is extended to end of such month.

(The above amendments are applicable from Assessment Year 2025-26)

18. Bringing back the concept of Block Assessment in search cases-New Scheme:

In order to make the rationalize the procedure of assessment of search cases to make it cost effective, and meaningful, and to reduce multiplicity of proceedings, the Finance Minister has proposed to bring back the concept of block assessment, as existed prior to 2021. The highlights of the new Scheme of Block Assessment are as under:

> ‘Block period’ means a period of six assessment years preceding the previous year of search or requisition and includes the part of the year upto conclusion of search or such requisition;

> Regular assessment or re-assessment proceedings for the block period would abate;

> Similar proceedings to be initiated for any other person found to have undisclosed income during the search;

> Income of block period subject to taxation at 60%, and computation thereof to be done in manner prescribed.

> Assessment to be done within 12 months from the end of the month in which last search authorization was made. However, for reference made to Transfer Pricing Officer, the time limit would be extended further by 12 months.

> Interest for delayed filing / non-filing of return of income in response to notice to be charged @1.5% per month on Tax on ‘undisclosed income’.

> No Interest u/s.234A, 234B or 234C.

> Penalty @50% of Tax on undisclosed income.

(This amendment will take effect from 1^st September, 2024)

Under the new scheme, say for Rs.100 of undisclosed income, the total tax and penalty outgo would be Rs.90 (60+30).

19. Modifications in provisions related to TDS/TCS:

In order to rationalize the provisions related to withholding of taxes, the Finance Minister has proposed following measures:

> TDS on Salary income to take into consideration any other TDS/TCS Credit available to employee while computing TDS to be done from Salary (e.f 1^st October, 2024).

> New requirement of doing TDS @10% from remuneration, interest etc. payable by firm to Partner, subject to threshold of Rs.20,000/-.

> New requirement of doing TCS @1% on sale of luxury goods to be specified, in addition to motorcars (w.e.f 1^st January, 2025)

> Scope of Nil/ Lower TDS/TCS certificate enlarged to include TDS u/s.194Q and TCS u/s.206C for purchase/sale of goods (e.f 1^st October, 2024).

> The TDS done outside India, in respect of which the taxpayer is allowed a credit against tax payable, shall be included in the total income of the taxpayer.

> Interest on delayed payment of TCS@1.5% per month, to bring it in line with TDS provisions.

Timelines for filing TDS/TCS Statements and passage of Orders:

> The TDS/TCS Corrections Statements can be filed upto 6 years from the end of the relevant financial year (currently no time limit is prescribed).

> The time limit for passing Order in respect of TDS/TCS defaults would be later, of the following:

• • 6 years from the end of the financial year to which TDS/TCS pertains;
  • 2 years from the end of financial year in which correction statement is furnished.

20. Modifications in provisions related to Penalty and Prosecution:

The Finance Minister has proposed following changes in provisions related to penalty/ prosecution:

> Penalty of Rs.50,000 would be levied in case of furnishing inaccurate information in the statement of Specified Financial Transaction or for failure to comply with due diligence requirements.

> For delay in filing TDS/TCS returns upto one month (currently one year) beyond the prescribed due date, no penalty would be applicable provided TDS/TCS is paid with Interest and fees.

> Basis feedback from field officers, it is proposed to omit the reference to the date of receipt of order by the Principal Chief Commissioner or Chief Commissioner in Section 275 of the Act.

> No prosecution for failure to deposit TDS, if TDS is deposited within due date of filing quarterly TDS returns.

21. Equalization Levy on E-Commerce Operators discontinued from 1^st August, 2024 onwards:

Effective from 1^st August, 2024 the Finance Minister has proposed to do away with Equalisation Levy @2% on E-Commerce Operators applicable as per Chapter VIII of the Finance Act, 2016 which was applicable from 1^st April, 2020. Needles to state that, taxation of income E-commerce operators under other provisions of the Act, would continue to be applicable.

Further, the Equalization Levy @6% on online advertisement would continue to apply.

22. Immunity from Penalty under Black Money Act for failure to report Foreign Asset in ITR-welcome relief:

Considering suggestions from various stakeholders, the Finance Minister has proposed to grant immunity from levy of penalty under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 for the failure to disclose foreign asset in ITR, provided the if the aggregate value of foreign assets (other than immovable property) is upto Rs.20 Lakhs.

(This amendment will take effect from 1^st October, 2024)

23. Introduction of Direct Tax Vivad se Vishwas Scheme, 2024 to settle pending disputes:

Considering the pendency in appeals at various fora, and with objective to reduce pending litigation; the Finance Minister has proposed Direct Tax Vivad se Vishwas Scheme, 2024 (‘the Scheme’) on the lines as done earlier in 2020.

The salient features about the Scheme are set-out hereunder:

> Pending appeals before JCIT(A), CIT(A), ITAT, High Court and Supreme Court; pending matters before DRP and pending revision petitions as on 22^nd July, 2024 are covered, subject to certain exclusions, as provided.

> Details of amounts payable for settlement of dispute is stated in below table:

	Amount payable before 31-12-2024	Amount payable after 31-12-2024
Tax Arrears for quantum appeals:
For appeals pending upto 31-1-2020	110% of Disputed Tax	120% of Disputed Tax
For appeals pending after 31-1-2020	100% of Disputed Tax	110% of Disputed Tax
Tax Arrears for other appeals:
For appeals pending upto 31-1-2020	30% of Disputed Interest/Fee/ Penalty	35% of Disputed Interest/Fee/ Penalty
For appeals pending after 31-1-2020	25% of Disputed Interest/Fee/ Penalty	30% of Disputed Interest/Fee/ Penalty

Note: In case of covered matters or in case of Departmental appeals, the amount payable will be 50% of above amount.

> The date of implementation of the Scheme, procedure for filling declaration and last date for filling declaration is to be notified.

> Assessee is required to make payment of amounts due under the Scheme within 15 days from receipt of certificate by the Designated Authority.

> Immunity from any proceedings for offence, interest and penalty for matters settled.

24. Immunity from Penalty and Prosecution under Prohibition of Benami Property Transactions Act, 1988:

The Finance Minister has proposed to grant immunity from levy of penalty and prosecution to a Benamidar or Abettor (other than beneficial owner), if the Benamidar/Abettor make a full & true disclosure of the whole circumstances relating to Benami transaction. Such immunity shall be withdrawn if the Benamidar or Abettor is found to be willfully concealing anything or giving false evidence.

25. Other

> Power of Transfer Pricing Officer expanded to include determination of arm’s length price of Specified Domestic Transactions.

> New Presumptive taxation scheme proposed for non-residents engaged in cruise shipping business. Also, lease rental paid to fellow subsidiary company (foreign company) would be exempt in hands of such company till Assessment Year 2030-31.

> The CIT(A) empowered to set aside an assessment order passed by the Assessing Officer as best judgement case and direct a fresh assessment thereof.

This is a welcome move as it would not only expedite pending appeals before CIT(A) but also help the taxpayers in case of huge demands raised, as the original demand would get cancelled once assessment is set-aside.

> Changes in Securities Transaction Tax:

Effective from 1^st October, 2024, the Finance Minister has proposed higher rates of STT on sale of Future/Option in securities; detail of which is given in table below:

Particulars	Old Rate	New Rate
Sale of an option in securities	0.0625% of option premium	0.1% of option premium
Sale of a future in securities	0.0125% of price at which futures are traded	0.02% of price at which futures are traded

> Rationalization of time lines for filing application and grant of registration u/s.12AB:

The Finance Minister has proposed to empower the Principal Commissioner/ Commissioner to condone delay in filing application, if he considers that there is a reasonable cause for the same.

Also, the time-limit for passing an order for approval u/s.12AB and u/s.80G is proposed to be revised to six months from the end of the quarter as against six months from the end of the month.

(This amendment will take effect from 1^st October, 2024)

> Definition of Specified Mutual Fund amended-welcome measure to bring clarity on taxation of Capital Gains on Exchange Traded Funds (ETFs), Gold Mutual Funds and Gold ETFs:

To address concerns of various stakeholders, the Finance Minister has proposed to amend the definition of Specified Mutual Fund (‘SMF’) in Section 50AA of the Act, such that Funds investing less than 65% of its proceeds in in debt and money market instruments; are excluded.

This would ensure that only Capital Gains arising from transactions in SMF are subjected to taxation as Short Term Capital Gain, at applicable rates.

This is a welcome step, and would bring certainty in treatment thereof by Assessee’s and the Assessing Officers.

(This amendment will take effect from Assessment Year 2026-27)

♦ Rationalisation of TDS rates:

Refer to the following table for the section-wise amendments in rates/threshold of TDS-:

Sr. No.	Section	Existing Rate	Proposed Rate	With effect from
1	Section 194D – Payment of insurance commission (in case of person other than company)	5%	2%	01-04-2024
2	194DA – Payments in respect of life insurance policy	5%	2%	01-10-2024
3	194G – Commission etc on sale of lottery tickets	5%	2%	01-10-2024
4	Section 194H – Payment of commission or brokerage	5%	2%	01-10-2024
5	Section 194-IB – Payment of rent by certain individuals or HUF	5%	2%	01-10-2024
6	Section 194M – Payment of certain sums by certain individuals or Hindu undivided family	5%	2%	01-10-2024
7	Section 194-O – Payment of certain sums by e-commerce operator to e-commerce participant	1%	0.1%	01-10-2024
8	Section 194-T – Remuneration, interest etc. payable by firm to Partner	Nil	10%	01-04-2024

II. INDIRECT TAXES

Key amendments proposed in respect to Goods and Service Tax are stated hereunder (to be effective from date to be notified unless otherwise specified):

> Section 70 amended to permit authorized representative to appear on behalf of summoned person and make submissions etc.

> The Time of supply for payment of tax under reverse charge, for service received from unregistered suppliers, would be shall be earlier of the date of payment or date of issuance of self-invoice by the recipient.

> Permitting availment of ITC for period Financial Year 2017-18 (e.f 1^st July, 2017) to Financial Year 2020-21 in returns filed upto 30^th November, 2021.

> Extending Time limit for availing ITC on invoices, where registration of vendor is cancelled, and revoked later on; such that same can be claimed in GSTR3B latest by 30^th November of next year or date of annual return of within 30 days of revocation.

> Restriction on ITC availment on tax paid under Section 74 to apply only till Financial Year 2023-24.

> Existing Section 73 and Section 74 to apply for demands till Financial Year 2023-24. Thereafter, new Section 74A would apply in all cases. The summary of new Section is as under:

• • Show Cause Notice to be issued within 42 months of due date of filing annual return of that year;
  • Order to be passed within 12 months from Show Cause Notice issue date, extendable further by 6 months;
  • No change in penalty (same as earlier Section 73 and Section 74);
  • Time limit for availing concessional penalty increased to 60 days (currently 30 days) from the Show Cause Notice/ Order.

> Reduction in Pre-deposit for filing appeals, refer comparison below:

Forum	Proposed (%)	Current (%)	Proposed (Maximum Amount)	Current (Maximum Amount)
Appellate Authority	10	10	20 Crores	25 Crores
Appellate Tribunal	20	10	20 Crores	50 Crores

Thus, Total Pre-deposit payable is reduced from 30% to 20%.

> Time period of 3 months for filing appeal before the GST Appellate Tribunal to commence from the date of communication of Order or the date to be notified, whichever is later.

> Section 128A inserted to provide for GST Amnesty Scheme as per recommendation of GST Council.

> Refund of unutilized ITC or IGST paid on export of goods which are subject to export duty.

Conclusion: The Finance (No.2) Bill, 2024, represents a strategic shift towards more inclusive and growth-oriented economic policies. By maintaining tax stability while introducing reforms to simplify and rationalize tax provisions, the bill seeks to address longstanding issues and foster a more conducive environment for investment and economic development. As these proposals progress through Parliament, they promise to reshape India’s fiscal landscape, emphasizing transparency, efficiency, and equitable growth. Understanding these changes will be crucial for stakeholders to navigate the evolving tax and regulatory environment effectively.