Budget 2024 Highlights

Posted on Friday, September 20th, 2024 | By IndusInd Bank

Budget Day in India is highly anticipated, with businesses and the public keen to see the new schemes and initiatives. This year, due to elections, Budget 2024 was announced later than usual, on February 1. The Finance Minister presented the Final Budget on July 23, 2024, emphasizing employment, skilling, MSMEs, and the middle class. The budget’s main priorities are:

• Productivity and Resilience in Agriculture
• Employment and Skilling
• Inclusive Human Resource Development and Social Justice
• Manufacturing and Services
• Urban Development
• Energy Security
• Infrastructure
• Innovation, Research, and Development
• Next Generation Reforms

Budget 2024 Highlights for Direct Tax Proposals

Income Tax Slabs under the new regime for FY 2024-25 are as below:

Under the new tax regime, the standard deduction for salaried individuals has been raised to ₹75,000 from ₹50,000. Additionally, the deduction for family pension has been increased to ₹25,000 from ₹15,000 for those with pension income. As a result of the above changes, a salaried employee in the new tax regime can save up to Rs. 17,500 in taxes.

1.    Simplification of Taxation of Capital Gains

For classifying assets as long-term or short-term, the new rules set holding periods at 12 months and 24 months, removing the previous 36-month period.

• Listed Securities: Assets held for more than 12 months are considered long-term.
• Other Assets: Assets held for more than 24 months are considered long-term.
• Unlisted Bonds and Debentures: These will be taxed like debt mutual funds, treated as short-term regardless of holding period, and taxed at slab rates.

Tax Changes:

• Short-Term Capital Gains: The tax rate for listed equity shares, equity-oriented funds, and business trust units is increased from 15% to 20%. Other short-term assets will continue to be taxed at slab rates.
• Long-Term Capital Gains on Equity Shares and Equity-Oriented Units: The exemption limit has increased from ₹1 lakh to ₹1.25 lakh per year, but the tax rate has gone up from 10% to 12.5%. This change applies for the entire year, with the new rate effective from July 23, 2024.
• Long-Term Capital Gains on Other Assets: The tax rate is reduced from 20% to 12.5%. However, the indexation benefit has been removed. Any long-term asset sold from July 23, 2024, will be taxed at 12.5% without the indexation benefit.

2.    Changes in TDS Rates

Budget 2024 has lowered TDS rates on certain payments to help businesses and improve taxpayer compliance. However, these new TDS rates will only apply from either October 1, 2024, or April 1, 2025. The table below lists the specified payments affected.

3.    Abolishment of Angel Tax

The Angel Tax under Section 56(2)(viib) is proposed to be removed. Angel Tax is a tax on companies that issue new shares at a price higher than their Fair Market Value. The excess amount was taxed under Section 56(2)(viii) as Angel Tax. Removing this provision will benefit startups, reducing their compliance costs and time spent on fundraising.

4.    Increased Deduction for Employer’s Pension Contributions

Under Section 80CCD, the deduction limit for an employer’s contribution to a pension scheme has been increased from 10% to 14% of the employee’s salary from the previous year.

5.    Securities Transaction Tax (STT) Changes

STT on futures has been increased from 0.0125% to 0.02%, while STT on options has been increased from 0.0625% to 0.1%. This change will come into effect from 1^st October 2024.

6.    Other Direct Tax Updates

• Reopening of ITR: Assessments can only be reopened beyond three years if the escaped income is ₹50 lakh or more, up to a maximum of five years from the end of the assessment year. For search cases, the limit has been reduced from 10 years to six years.
• Income Tax Appeals: To address pending cases, the limits for filing tax dispute appeals have been increased to ₹60 lakh for tax tribunals, ₹1 crore for High Courts, and ₹2 crore for the Supreme Court.
• Vivaad se Vishwas Scheme: This scheme has been reintroduced to help settle income tax disputes and reduce litigation.

Conclusion

Budget 2024 introduces several key changes to simplify taxes and support growth. It includes revised income tax slabs, increased deductions, and updated capital gains tax rates. These updates are designed to make tax planning easier and more advantageous.

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Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.