Highlights:
Finance Minister Nirmala Sitharaman presented the Union Budget 2024-25 in Parliament today, marking the beginning of Prime Minister Narendra Modi's third term. The budget focuses on nine key priorities aimed at creating abundant opportunities for all. On the macroeconomic front, FM Sitharaman reduced the fiscal deficit target for FY25 to 4.5% and introduced a revamped income tax framework under the new regime, along with an increased tax rate on long-term capital gains.
Major Sectors Focus:
FM Sitharaman outlined the budgetary priorities, which include:
- Productivity in the agricultural sector
- Employment and skill development
- Inclusive priorities and social justice
- Manufacturing and services
- Urban development
- Energy security
- Infrastructure
- Innovation and research
- Next generation reforms
Key Announcements:
DIRECT TAX
CHANGE IN TAX SALB IN NEW REGIME
0-3,00,000 |
NIL |
3,00,001-7,00,000 |
5% |
7,00,001-10,00,000 |
10% |
10,00,001-12,00,000 |
15% |
12,00,001-15,00,000 |
20% |
15,00,0001 and above |
30% |
- Increase in standard deduction:
Standard deduction under new tax regime has been raised from INR 50,000 to INR 75,000
- Family Pension Deduction Limit increased for pensioners
In addition to the relief for taxpayers under new tax regime, the government has also increased the Family Pension Deduction Limit for pensioners. Previously set at Rs 15,000, this limit has now been raised to Rs 25,000. This change allows pensioners to deduct a higher amount from their taxable income, offering them further financial relief.
- Abolition of Angel tax
- The Angel Tax, which previously taxed investments received by startups that surpassed the fair market value of their shares, has been abolished. Startups will no longer be taxed on investments exceeding the fair market value of their shares.
- A Rs 1,000 crore venture capital fund has been established specifically for investments in the space economy.
- Reduction on Corporate Tax on Foreign Companies
- Corporate taxes are levied on a company's net income or profit. In the Budget 2024, Finance Minister Nirmala Sitharaman has proposed a reduction in the corporate tax rate for foreign companies from 40% to 35%.
- Changes in STT (Securities Transaction Tax)
- The Securities Transaction Tax (STT) on futures has been raised from 0.0125% to 0.02%, while the STT on options has been increased from 0.0625% to 0.1%.
- TDS/TCS on Partner Payments:
- Payments such as salary, commission, bonus, and interest from a firm to its partner will be subject to a 10% TDS if the total amount exceeds ₹20,000 in a financial year.
- TDS is proposed on interest exceeding ₹10,000 on Floating Rate Savings (Taxable) Bonds (FRSB) 2020 or any other notified security of the Central or State Governments.
- Levy TCS of 1% on notified goods of value exceeding 10 lakh rupees. TDS on Floating Rate Savings (Taxable) Bonds (FRSB) 2020
CHANGES IN TDS RATES:
To facilitate business and improve taxpayer compliance, Budget 2024 has reduced the TDS rates on specified payments. The new TDS rates will be effective from either 1st October 2024 or 1st April 2025, depending on the payment type. Below is the table showing the specified payments:
TDS Section |
Current TDS Rate |
Proposed TDS Rate |
Effective from |
Section 194D - Payment of insurance commission in case of other than company |
5% |
2% |
1st April 2025 |
Section 194DA - Payment in respect of life insurance policy |
5% |
2% |
1st Oct 2024 |
Section 194G -Commission on sale of lottery tickets |
5% |
2% |
1st Oct 2024 |
Section 194H - Payment of commission or brokerage |
5% |
2% |
1st Oct 2024 |
Section 194-IB - Payment of Rent by certain individuals or HUF |
5% |
2% |
1st Oct 2024 |
Section 194M - Payment of certain sums by certain individuals or HUFs |
5% |
2% |
1st Oct 2024 |
Section 194-O - Payment of certain sum by e-commerce operator to e-commerce participants |
1% |
0.1% |
1st Oct 2024 |
Section 194F - Payment on account of repurchase of units by mutual funds or UTI |
Proposed to be omitted |
1st Oct 2024 |
CHANGE IN CAPITAL GAIN TAX:
|
Earlier STCG |
Now STCG |
Holding Period |
Holding Changed? |
Earlier LTCG |
Now LTCG |
Stocks |
15% |
20% |
12 months |
No |
10% |
12.50% |
Equity Mutual Funds |
15% |
20% |
12 months |
No |
10% |
12.5% |
Debt and non-Equity MFs |
Slab rate |
20% |
N/A |
Same as previous |
Slab rate |
Slab rate |
Bonds |
Slab rate |
20% |
12 months |
No |
10% |
12.50% |
REITs/inVITS |
15% |
20% |
12 months |
Yes, Earlier 36 |
10% |
12.50% |
Equity FoFs |
Slab Rate |
20% |
N/A |
Yes, Earlier Same for STCG and LTCG |
Slab Rate |
12.50% |
Gold/Silver ETF |
Slab Rate |
20% |
24 months |
Yes, Earlier Same for STCG and LTCG |
Slab Rate |
12.50% |
Overseas FoFs |
Slab Rate |
Slab Rate |
12 months |
Yes, Earlier Same for STCG and LTCG |
Slab Rate |
12.50% |
Gold Funds |
Slab Rate |
Slab Rate |
12 months |
Yes, Earlier Same for STCG and LTCG |
Slab Rate |
12.50% |
All Unlisted Assets
|
Earlier STCG |
Now STCG |
Holding Period |
Holding Changed? |
Earlier LTCG |
Now LTCG |
Real Estate (Real Estate) |
Slab Rate |
Slab Rate |
24 months |
No |
20% |
12.5% |
Bonds(UNLISTED) |
Slab Rate |
Slab Rate |
24 months |
Yes, earlier same for STCG & LTCG |
Slab Rate |
Slab Rate |
Physical Gold |
Slab Rate |
Slab Rate |
24 months |
Yes, Earlier 36 |
20% |
12.5% |
Stock(Unlisted) |
Slab Rate |
Slab Rate |
24 months |
No |
20% |
12.5% |
Foreign Equities/debt |
Slab Rate |
Slab Rate |
24 months |
NO |
20% |
12.5% |
CHANGES IN INDIRECT TAX:
Cut in Custom Duties:
- Customs duties on gold, silver cut to 6%, platinum to 6.4%
- Lithium, Copper, Cobalt exempted from Custom Duty
- Expand the list of exempted capital goods used in manufacturing of solar cells, panels
- Reduce BCD subject to conditions on MDI for manufacturing of spandex yarn from 7.5% to 5%
- Exempt customs duty on manufacturing of connectors
- Exempt customs duty on Oxygen-fused copper
GST Announcement:
The government has introduced several amendments to the Goods and Services Tax (GST) laws to simplify compliance and address legacy issues:
- Introduction of Section 128A, which provides a waiver of interest and penalties for non-fraudulent taxpayers being assessed only under Section 73 for the periods FY 2017-18, 2018-19, and 2019-20
- Exclusion of Extra Neutral Alcohol used in the manufacture of liquor from the central tax purview.
- Extension of the time limit to avail input tax credit by inserting two new subsections to Section 16 of the CGST Act.
- Reduction in the maximum amount of pre-deposit required for filing an appeal with the Appellate Authority from Rs. 25 crore to Rs. 20 crore of central tax.
- These amendments aim to create a more transparent and business-friendly environment while simplifying compliance processes
ANNOUNCEMENTS FOR MSMES:
- New mechanism for facilitating continuation of bank credit to MSMEs during their stress period.
- Limit of Mudra loans increased from ₹10 lakh to ₹20 lakh.
- Turnover threshold of buyers for mandatory on boarding on TReDS platform to be reduced from ₹500 crore to ₹250 crore.
- Financial support for 50 multi-product food irradiation units in MSME sector.
- E-Commerce Export Hubs to be set up in PPP mode to enable MSMEs and traditional artisans to sell their products in international markets.
ANNOUNCEMENTS FOR STARTUPS:
- Amendment in Tax Treatment of Share Buy-Backs:
- Effective Date: Proposed amendments with effect from 1 October 2024.
- Section 115QA: Will not be applicable, meaning no tax will be levied on the company undertaking the buy-back.
- Taxation of Shareholders: The amount received on buy-back will be taxable in the hands of shareholders as a deemed dividend and will be taxed at applicable rates.
- No Deductions: No deductions will be available against such deemed dividend income.
- Capital Loss: The entire Cost of Acquisition (COA) of the shares bought back will generate a capital loss for the shareholder, which can be set off against other capital gains.
- Rationalization of WHT (Withholding Taxes) Rates for E-Commerce Operators:
- Previous Rate: Section 194-O levied WHT at 1% on transactions of goods and services facilitated by e-commerce operators on digital platforms.
- Offline Transactions: Offline sales of goods and services attracted WHT at 0.1%.
- New Rate: To rationalize WHT on online transactions, the rate has been reduced from 1% to 0.1% under Section 194-O, effective from 1 October 2024.
- Removal of Exemption for Gifts by Corporate Entities:
- Section 47(iii): Exemption is proposed to be restricted to the gift of assets by individuals or Hindu Undivided Families (HUFs).
- Corporate Entities: Gifts of assets by corporate entities or any entity other than individuals or HUFs will not be eligible for capital gains tax exemption.
- A new ₹1,000 crore venture capital fund has been announced specifically for investments in the space economy.
ANNOUNCEMENTS FOR MANUFACTURING AND SERVICE SECTORS
Promotion of Manufacturing and Services
- Youth Internships: Scheme for 1 crore internships in top 500 companies over 5 years, with Rs. 5,000 monthly allowance and Rs. 6,000 one-time assistance.
- Industrial Parks: Development of investment-ready "plug and play" industrial parks with states and private sector.
- National Industrial Corridor: Sanction of 12 industrial parks.
- Critical Mineral Mission: Recycle critical minerals, promote domestic production, and acquire overseas assets.
- Offshore Mining: First tranche auction of offshore blocks for mining.
- Insolvency and Bankruptcy Code: Integrated Technology Platform for improved outcomes.
- C-PACE Services: Extended for voluntary closure of LLPs.
- National Company Law Tribunals: Additional tribunals, some exclusively for Companies Act cases.
- Debt Recovery: Establishment of additional Debt Recovery Tribunals.
ANNOUNCEMENT FOR IFSC -INCENTIVES TO IFSC:
- Retail schemes and Exchange Traded Funds in IFSC, shall enjoy tax exemptions along similar lines as available to specified funds.
- Exemption of certain income of Core Settlement Guarantee Fund set up in IFSC.
- Exclusion of the applicability of section 94B to certain finance companies located in IFSC.
- Where a venture capital fund (VCF) located in IFSC extends a loan / other amount to an assessee, it shall no longer be called upon to explain the source of funds.
- Surcharge shall not apply on income-tax payable on income from securities by specified funds.
OTHERS
- ANNOUNCEMENTS FOR AGRICULTURAL SECTOR:
- Provision of ₹1.52 lakh crore for the agriculture and allied sectors
- 10,000 bio research centres will be established.
- Next two years, 1 crore farmers will be initiated into natural farming supported by branding and certification.
- Vegetable production and supply chain, large clusters to be developed closer to consumption centres.
- Financial support for shrimp breeding centres to be provided, export to be facilitated through NABARD.
- Kisan Credit Cards to be launched in 5 states.
- To release 109 varieties of 32 crops.
- Will help Natural Farmers with verification and branding.
- To ensure self-sufficiency in pulses and oil seeds6 crore farmers and their land will be brought into the farmer and land registry
- 3 SCHEMES ANNOUNCED FOR ‘EMPLOYMENT LINKED INCENTIVE:
FM Sitharaman announces three schemes for employment-linked incentives. These schemes will be based on enrolment in the EPFO and focus on recognizing first-time employees.
- Scheme A: First timers : First-timers to receive one month's wage upon entering the workforce in all formal sectors. A direct benefit transfer (DBT) of one month's salary, up to ₹15,000, to be provided in three instalments.
- Scheme B: Job creation in manufacturing: Job creation in manufacturing sector to be incentivized through a scheme linked to the employment of first-time employees. Incentives to be provided to both employees and employers as per their EPFO contributions for the first 4 years of employment.
- Scheme C: Support to employers: Reimbursement to employers up to ₹3,000 per month for 2 years towards their EPFO contribution for each additional employee. The eligibility limit for this will be a salary of ₹1 lakh per month, and it is expected to benefit 2.1 lakh youths
- HUMAN RESOURCE DEVELOPMENT AND SOCIAL JUSTICE
- Rural Development: Rs. 2.66 lakh crore allocated for rural development and infrastructure.
- Eastern Region Development: Launch of Purvodaya for Jharkhand, Bihar, Odisha, West Bengal, and Andhra Pradesh.
- Industrial Development: Support for the Amritsar Kolkata Industrial Corridor at Gaya.
- Road Connectivity: Patna-Purnea and Buxar-Bhagalpur Expressways, and additional projects totaling Rs. 26,000 crore.
- Power Projects: New 2400 MW power plant at Pirpainti costing Rs. 21,400 crore.
- Andhra Pradesh Support: Rs. 15,000 crore in the current year with further funds for the Andhra Pradesh Reorganization Act, Polavaram Irrigation Project, and industrial nodes.
- Housing: Three crore additional houses under PM Awas Yojana.
- Women-Led Development: Over Rs. 3 lakh crore allocated for women and girls' welfare.
- Tribal Development: Pradhan Mantri Janjatiya Unnat Gram Abhiyan to benefit 63,000 villages and 5 crore tribal people.
- Banking Services: Over 100 new branches of India Post Payment Bank in the North East.