Call Budget changes dated 23rd July, 2024
Budget in India is the most anticipated event, where every taxpayer is hoping that they get benefited from it. In current year, Budget was declared on 23rd July, 2024 due to General Loksabha Elections.
This year’s budget was mainly focused on increasing productivity in agriculture, research and development, human resources skilling, employment facilitation, manufacturing, infrastructure etc.
In this budget, it was often highlighted that the government is trying to Review the Income tax act, simplifying taxation related to charities, reforming for simplifying provisions of TDS, matters related to litigation and appeals and deepening the tax base.
Let us go through the areas covered under the direct taxes in this budget.
Key highlights of Budget, 2024
Among various diverse points mentioned in the budget, ley us look at some of the key highlights mentioned therein:
- Increase in Standard Deduction:
Previously salaried individuals were eligible for a standard deduction of Rs.50,000.
Under the new regime, the standard deduction for salaried individuals has been increased to Rs. 75,000.
- Increase in Family Pension deduction:
Previously a deduction on family pension was allowed for Rs.15,000.
Under the new regime, the deduction amount has been increased to Rs. 25,000.
- Income Tax slabs Structure under new tax regime:
As a result of changes in the income slabs, government has mentioned that a taxpayer will save Rs.17,500 annually in taxes.
New Income Tax Slabs:-
| Income Limit | Tax Rate |
| Upto Rs. 3L | Nil |
| Rs.3-7L | 5% |
| Rs.7-10L | 10% |
| Rs.10-12L | 15% |
| Rs.12-15L | 20% |
| Above Rs.15L | 30% |
- TCS Credit to be allowed against TDS on salaries:
Salaried individuals will be able to claim the credit of TCS paid on certain transactions against salary income. This means the TDS deduction on salary income will be done after considering the TCS credit. The employees will have to declare the details of TCS and TDS paid on other than salary transactions to the employer. The employer will have to consider these details and calculate the TDS to be deducted from the salary based on the employee’s income, tax regime, and tax slab.
- Change in tax rate of corporate tax for foreign companies:
It has been proposed to reduce corporate tax rate for foreign companies from 40% to 35%.
This tax rate is applied on the net profits of the companies.
- Single regime exemption to charitable trusts:
Charitable trusts/entities enjoys exemptions under Section 10(23C) and Section 11, dealing with provisions like registration, conditions for approval etc.
- Capital Gain transactions simplified:
- Period calculation for short term and long term-
Asset classification for short and long term will be done on the basis of 12 months and 24 months duration. The criteria of 36 months has been removed now.
- Listed securities holding period-
Holding period for all listed securities is 12 months. All listed securities with a holding period exceeding 12 months are considered long term.
- Any other asset except listed securities-
The holding period for all other assets except listed securities is 24 months.
- Unlisted bonds and debentures-
Unlisted bonds and debentures will be treated as short-term irrespective of the period of holding.
- Listed equity shares capital gain tax rate-
Short term capital gain tax on listed equity shares, a unit of an equity-oriented fund, and a unit of a business trust has been increased to 20% from previous rate of 15%. Short term capital gain on all the other financial or non-financial assets will attract tax at slab rates.
- Single rate for Long term capital gain on financial and non-financial assets-
The exemption limit on long term capital gains on transfer of equity shares or units of equity-oriented funds or units of business Trust has increased from Rs.1 Lakh to Rs.1.25 lakh per year.
Tax rate on the same has been increased to 12.5% from previous rate of 10%.
Tax rate on Long term capital gains on all the other financial and non-financial assets is reduced to 12.5% from previous rate of 20%.
- Indexation benefit removed-
Indexation benefit on sale of long term assets is now removed. This means any sale of long term asset made from 23rd July, 2024 will attract 12.5% tax rate without indexation benefit.
However, FMV benefit provision of asset as on 01.04.2001 as cost while selling the asset will be continued without any change.
- 2% Equalisation levy abolished:
From 01.08.2024, it is proposed that equalisation levy of 2% on certain Non-resident digital companies shall stand abolished. However, the 6% rate of levy shall remain the same.
- Angel tax abolished:
In the benefit of startups, Angel tax is abolished. Angel tax refers to a tax imposed on the capital raised by unlisted companies through the issuance of shares, when the amount received exceeds the fair market value of the shares. This tax was introduced in India in 2012 under Section 56(2)(viib) of the Income Tax Act to prevent money laundering and curb black money. The tax applies to startups and other private companies that receive investments from angel investors, venture capitalists, or private equity firms.
- STT (Security Transaction Tax) on Futures and Options:
The STT on futures has been increased from 0.0125% to 0.02% and STT on options has been increased from 0.0625% to 0.1%.
- TDS on Partner’s remuneration:
Budget 2024 has proposed a significant change for partnership firms with the proposal to insert a new TDS section 194T of the Income Tax Act, 1961. Any payment by a firm in the nature of salary, remuneration, interest, bonus or commission to partner of the firm exceeding Rs. 20,000 shall be subjected to the TDS at the rate of 10% u/s 194T.
- Section 194-O TDS on e-commerce operator:
Payment of certain sum by e-commerce operator to e-commerce participants shall attract TDS @0.1% instead of 1%.
- NPS employer’s Contribution deduction increased:
The deduction under Section 80CCD(2) is set to be raised from 10% to 14% of the basic salary. It is proposed to increase the amount of deduction allowed to an employer in respect of his contribution to a pension scheme referred to in section 80CCD, from the extent of 10% to the extent of 14% of the salary of the employee.
Conclusion:
Among the many significant proposals made in the Budget 2024 on 23rd July, 2024 certain provisions are made effective from the date of budget itself while some of the provisions shall apply at a later date. The budget has brought certain significant changes in capital gains, indexation benefits, standard deductions, new regime slab rates and changes in certain TDS rates.
About Author:
CA Chinmay Shirish Agate Chinmay Agate is a Practicing Chartered Accountant having 4+ years of experience and expertise in the field of Direct Taxation and Auditing compliances. In the past, he worked in various CA firms and comes with wide industry experience from services, retail to manufacturing to trading where he has handled various complex assignments. He has keen interest in Forex and Derivative knowledge as well as fundamental analysis.