Union Budget 2024: Unleashing Transformative Direct Tax Reforms in Modi 3.0

Income tax changes in Union Budget 2024: The rates of tax slab have been rationalised only for the new tax regime of personal income taxes.

What is the Union Budget?

Source: maddiqelfreda.pages.dev

The Union Budget of India, also known as the Annual Financial Statement under Article 112 of the Indian Constitution, is an annual financial document for the country to be prepared every year by the Ministry of Finance for the succeeding financial year, describing the expenditures and revenues of the government that would be planned.

The Department of Revenue looks after what is expected to come to the government, and the Department of Expenditure deals with public sector expenditure. This multi-year financial plan projects the economic conditions accordingly based on the government’s policy actions.

The Union Budget is presented by the government on the first day of February so that it may be implemented before the new financial year starts in April. Until 2016, the budget was presented in the Parliament by the Finance Minister on the last working day of February. The budget is prepared by the budget division of the Department of Economic Affairs (DEA) under the Ministry of Finance.

The budget is presented in the form of two bills: the Finance Bill and the Appropriation Bill, both of which have to be passed by the Lok Sabha before it can come into force on April 1, when the financial year for India commences.

In today’s era, from Sansad Bhawan, the budget presentation is telecast live on DD National, DD News, and Sansad TV from 11:00 am to 1:00 pm. Then, this is followed by a panel report on the changes, benefits, and shortcomings of the budget. Merits and Demerits Other budget documents and materials are found on the website of the government budget and the Union Budget Mobile app.

The Rail Budget, which was presented separately for 92 years, has been merged with the Union Budget.

From 1947, India had a total of 73 annual budgets, 14 interim budgets and four special budgets, or mini-budgets.

Budget Allocation announced on 23rd July:

Source: siasat.com

Within weeks of the election which saw the Modi government back in power for a second innings, Finance Minister Nirmala Sitharaman presented her seventh Union Budget on July 23. This will be a panoramic budget that reflects Prime Minister Narendra Modi’s single-minded pursuit of transforming India’s economy. Building on the interim budget a few months ago, it signals a new regime of fiscal prudence combined with long-term investments in areas which will make the country more resilient to any shock to the economy.

The Finance Minister has presented a far-reaching vision for India’s future while elaborating on matters pertaining to agriculture, welfare for first-time workers, and generation of youth employment, besides making adequate provisions for modernising the infrastructures such as expressways, railway corridors, airports, sports facilities, and more.

The full Budget of 2024 was focused on direct taxes. Indeed, the FM proposed a complete review of the income tax law within the next six months to make it concise, clear, and user-friendly.

Personal taxation

On the personal income tax front, the slab rates have been tinkered with only in the new tax regime.

In another key relief, it has proposed to hike the standard deduction from Rs 50,000 to Rs 75,000. As a measure towards pushing investment in the NPS, it has also proposed to increase the threshold for employer contributions—excluding the state government and central government employers—from 10 per cent to 14 percent of the salary payable to an employee towards the scheme. These steps, at the end, according to FM, would offer a benefit of Rs 17,500 to individual taxpayers and incentivize the new tax regime.

Corporate Taxation

The Government has withdrawn the Angel Tax that was imposed on investments in privately held companies if such investments were made at a valuation higher than its fair market value to provide a more conducive investment environment. This will now provide a better platform for start-ups to mobilise funds at higher valuations where they can now generate funding over and above the FEMA floor price without having any tax implications and, hence enhance the price negotiation power.

It has also proposed cutting the tax rate from 40 percent to 35 percent to attract foreign companies and non-residents. The step will help arrest the fall in FDI inflows witnessed in the last fiscal year, which was stated by the economic survey. The rate cut will also reduce the prevailing tax difference between the foreign and domestic companies.

Capital Gains Taxation

In what can be called a big-ticket initiative, the Finance Minister has mooted the rationalisation of capital gains taxation. To make the computation of long-term capital gains easier, the benefit of indexation would be withdrawn, which would increase the tax cost, mainly for the sale of older assets, including ancestral properties. 

Exemption in respect of long-term capital gains on listed equity shares, equity-oriented mutual funds and units of business trusts shall rise from Rs 1 lakh to Rs 1.25 lakh per annum.

Other Key Measures

The TDS rate structure will be rationalised for the ease of doing business by the government. The 2 per cent Equalization Levy on e-commerce supplies of goods or services will not be applicable from August 1, 2024, announced the government.

This has shifted the responsibility for the buyback tax from the company to its shareholders and now it is taxed as dividends. The cost of acquiring such shares will be a capital loss for investors, which on being offset against other capital gains will lead to an increased overall tax burden from 20 percent to 30 percent.

These remarkable tax reforms under Budget 2024 are, therefore, going to set the stage for a far more dynamic and fairer economic landscape that is bound to unleash new opportunities and drive green growth across all sectors.

Link to the X post by the PM Narendra Modi about the Union Budget 2024:

https://x.com/narendramodi/status/1815666176371909025?t=YcjhGGqODJMK-Hqs7GvS4A&s=08