Union Budget 2024: Key Highlights and Impacts on the Indian Economy {update}

Land Digitization Initiatives

The introduction of Bhoo-Aadhar for rural lands and the digitization of urban land records are noteworthy steps. These measures aim to streamline land ownership records, reduce disputes, and improve land management. Digitization could be a game changer by making land transactions more transparent and efficient.

NPS Vatsalya: A New Scheme for Minors

A new scheme, NPS Vatsalya, has been introduced. Under this scheme, parents can contribute to a National Pension System (NPS) account for their minors. By the time the child turns 18, the plan will convert into a regular NPS account. This initiative encourages long-term savings and financial planning for children.

Fiscal Deficit Target

The fiscal deficit target for FY25 is set at 4.9%. This target reflects the government’s commitment to fiscal discipline while balancing the need for economic growth and development. Achieving this target will require careful management of expenditures and revenues.

Income Tax Reforms

The budget also includes significant reforms in the income tax regime. Last year, 66% of individual taxpayers filed their income tax returns under the new tax regime. To simplify the tax process, a comprehensive review of the Income Tax Act is planned.

The simplification of capital gains tax is one of the major reforms. Short-term capital gains will be taxed at 20% or the applicable slab rate. The exemption limit for long-term capital gains will be increased to ₹1.25 lakh from the existing ₹1 lakh.

Startup Benefits

To encourage startups, the angel tax will be removed. This move is expected to foster innovation and entrepreneurship by reducing the tax burden on startup investments.

Securities Transaction Tax (STT) Increase

The budget proposes an increase in the STT on futures and options. The STT on securities has been hiked to 0.02% in futures and 0.1% in options. This increase aims to generate additional revenue for the government.

New Tax Regime Enhancements

The standard deduction under the new tax regime will be increased to ₹75,000 from the existing ₹50,000. Additionally, there are revisions in the tax slabs for the new tax regime for FY24-25:

• 0-3 Lakh: Nil
• 3-7 Lakh: 5%
• 7-10 Lakh: 10%
• 10-12 Lakh: 15%
• 12-15 Lakh: 20%
• 15 Lakh+: 30%

Note: Due to these changes, a salaried employee in the new tax regime can save up to ₹ 17,500/- in income tax.

These changes are designed to provide tax relief to individuals and encourage more people to opt for the new tax regime.

Tax Changes Announced in India’s Budget 2024

July 23, 2024 – The Indian government has announced significant changes in the tax structure for the fiscal year 2024-25. The Finance Minister, Nirmala Sitharaman, presented the Budget on July 23, 2024, emphasizing reforms aimed at boosting the economy and supporting various sectors. Here are the key highlights from the tax section of the Budget 2024.

Direct Taxes

1. Income Tax Reliefs and Rebates:
   • The government has increased the rebate limit under Section 87A. Taxpayers with an annual income of up to ₹7 lakh are now eligible for a full rebate, up from the previous limit of ₹5 lakh.
   • The basic exemption limit has been raised from ₹2.5 lakh to ₹3 lakh, providing relief to small taxpayers.
2. New Tax Regime Adjustments:
   • The government has fine-tuned the new tax regime introduced last year. Taxpayers can now opt for a simplified tax regime with reduced rates and no exemptions or deductions.
   • The income slabs under the new tax regime have been revised to ensure it is more beneficial to taxpayers compared to the old regime.
3. Surcharge and Cess:
   • The highest surcharge rate on income above ₹5 crore has been reduced from 37% to 25%. This aims to make the tax system more equitable and less burdensome for high-income earners.
   • Education and health cess remain unchanged at 4%.

Indirect Taxes

1. GST Reforms:
   • The government has proposed several changes to the Goods and Services Tax (GST) framework to simplify compliance and reduce litigation.
   • A new mechanism for faster refunds and resolution of disputes has been introduced.
2. Customs Duty Adjustments:
   • Customs duties on various goods have been rationalized. Duties on essential goods like crude oil, some medical devices, and components for electric vehicles have been reduced to encourage domestic manufacturing and reduce import costs.
   • Conversely, higher duties have been imposed on luxury items to discourage imports and promote local alternatives.
3. Excise Duties:
   • Excise duty on certain petroleum products has been adjusted to balance the interests of consumers and the revenue needs of the government.
   • Excise duty on tobacco and related products has been increased to discourage consumption and boost public health.

Corporate Tax

1. Corporate Tax Rate:
   • The corporate tax rate for new manufacturing companies incorporated after October 1, 2019, and starting operations before March 31, 2024, remains at 15%. This is part of the government’s efforts to attract fresh investments.
   • Existing companies will continue to benefit from the reduced corporate tax rate of 22%, provided they do not avail of any exemptions or incentives.
2. Incentives for Startups:
   • The government has extended the tax holiday for startups by one more year. Eligible startups can now claim a 100% tax deduction on profits for three consecutive years out of the first ten years from incorporation.

Additional Measures

1. Digital Economy and Cryptocurrency:
   • A new tax framework for digital transactions and cryptocurrencies has been proposed. Income from the transfer of cryptocurrencies and other digital assets will be taxed at 30%, with no deductions allowed except for the cost of acquisition.
   • A 1% Tax Deducted at Source (TDS) on payments made for the transfer of digital assets has also been introduced to track transactions.
2. Green Initiatives:
   • To support environmental sustainability, the government has introduced tax incentives for investments in renewable energy and electric vehicles.
   • A new green tax has been proposed on old and polluting vehicles to encourage their replacement with newer, cleaner options.