The Union Budget 2024: An Overview

Finance Minister Smt. Nirmala Sitharaman presented her consecutive seventh budget on July 23, 2024, in Parliament from 11:02 am to 12:30 pm. Before presenting the budget in Parliament, several procedures must be followed. Two days prior, there is a program involving the eating of sweets and halva. On the day of the budget, the Finance Minister first meets the President and then goes to Parliament House, where a photo session with the file of papers is held outside the house. Unlike ten years ago, when the Finance Minister came to the house with a bag in hand, they now bring only a file.

When we heard the budget speech and watched it on TV, many of us thought there was nothing new in the budget—no new taxes or relief. However, after reading it, we learned that there are amendments to 99 items in Direct Tax (i.e., Income Tax Act) and 58 amendments in Indirect Tax (i.e., Customs, Central Goods and Services Tax, Integrated Goods and Services Tax, Goods and Services Tax (Compensation to States), etc.).

Direct Tax:

• Standard Deduction for salaried employees in case of New Regime is increased from Rs. 50,000 to Rs. 75,000
• Income Tax Slab rate under New Tax Regime change resulting in to tax saving
• Increase in allowable remuneration to the working partner of firm
• Corporate tax rate on foreign companies reduced from 40% to 35%
• Tax rate on short term capital gains increased from 15% to 20% in case of sale of Listed Shares, equity oriented Mutual Fund, listed Bonds, Gold/Silver ETFs, REITs/In VITs, etc.
• Tax rate on Long Term capital gains is raised from 10% 12.50%. Even the benefit of Indexation is removed in case of long-term capital gains.
• Now only two holding periods for all asset classes to determine whether the gains are short term or long term capital gains. The two holding periods will be 12 months and holding periods of Gold, debentures, bonds will be 24 months(along with unlisted shares and Real Estate) to classify gain as long term.
• Increase in limit of exemption from existing Rs. 1lakh to Rs. 1.25lakh per year in case of long term capital gains on listed equity and equity oriented mutual fund.
• Clarification regarding reporting of income from letting out of residential house or a part of by owner under “Income from House Property” rather than under the head “ Profit and Gains from Business or Profession”
• Increase in Security Transection Tax (STT) from o.o625% to 1% in case of option and from 0.0125% to 0.02% in case future transection.
• Income from buyback of shares by companies be chargeable in the hand of the recipient investor as dividend, instead of current regime of additional income tax in the hands of the company. Further, the cost of such shares will be treated as capital loss to the investor.
• Standard Deduction on the family pension increased from 15,000 to 25,000.
• Abolishment of Angel tax i.e. abolition of taxation on share premium received which exceeds the fair value of shares, issued by the unlisted company.
• Credit of TCS to be given while determining the TDS to be deducted on salaries.

Rationalization of TDS rates from 5% to 2% as under:

• Introduced new Section 194T for TDS on payment of salary, remuneration, interest, bonus or commission by partnership firm to partners at the rate of 10% where aggregate payment exceeds Rs. 20,000
• TDS rate on e-commerce operators to be reduced from 1% to 0.1%.
• No more reopening, re-assessment of old ITR beyond 3 years if escaped income is below Rs. 50lakh.
• Re-assessment in search cases reduced to 6 years from 10 years before the year of search.
• The time limit for which Income tax reassessment can be done is reduced from 10 years to 5 years.
• Vivad se Vishwas Scheme 2014 is introduced to dissolve disputed direct tax issues and eliminate litigation.
• The deduction for employers’ contributions towards NPS is increased from 10% to 14% of the employee’s salary.

Indirect Tax:

• Reduction in basic custom duty on gold and silver from 15% to 6% and in case of platinum from 15.4% to 6.4%.
• Reduction in basic custom duty on Mobile Phone, Mobile PCBA and charger from 20% to 15%
• Exemption on basic custom duty on capital goods for manufacturing of solar cells and panels to support energy transition.
• Exemption of custom duties on 25 critical minerals to boost to strategic sectors.
• The time limit for taxpayers to benefit from reduced penalties by paying the demanded tax with interest has been extended from 30 to 60 days.
• Common time limit for issuing demand notices and orders for financial year 2024-25 on words has been proposed, regardless of fraud or will full misstatement charges.

Above changes are suggested in the Budget 2024-25.

Conclusion: The Union Budget 2024 presented by Finance Minister Smt. Nirmala Sitharaman has introduced significant changes in both direct and indirect taxes. These amendments aim to simplify tax compliance, encourage investment, and provide relief to various sectors of the economy. While initial reactions may have downplayed the budget’s impact, a detailed examination reveals a comprehensive effort to address multiple economic and fiscal challenges. The budget reflects the government’s commitment to fostering growth, ensuring fair taxation, and promoting strategic sectors essential for India’s development.