Finance Minister Nirmala Sitharaman today presented the government's first budget after the recently concluded Lok Sabha Elections. The Union Budget 2024 proposes a slew of changes in taxation policies – from giving income tax relief to some to boost spending to rationalising the capital gains tax rate and holding period of various assets.
A Look At Tax Changes Announced In Union Budget 2024:
1. Personal Income-Tax
The government cut income tax rates for some citizens in an effort to boost consumption.
The annual income between Rs three lakh and Rs 7 lakh will now attract a 5 percent tax rate, relaxing the earlier upper end of income of upto Rs 6 lakh, Finance Minister Nirmala Sitharaman said in her Budget speech.
The government has revised a system introduced in 2020 where the annual income of up to Rs 15 lakh is taxed between 5 percent to 20 percent, while income of over Rs 15 lakh were taxed at 30 percent.
The Budget also increases the standard deduction for salaried employees to Rs 75,000 from Rs 50,000 earlier.
The amount of tax deductions related to family pension contributions and non-government employees' contributions to the new pension scheme have also been increased.
2. Capital Gains Tax
The government raised the tax rate for equity investments held for less than one year to 20% from 15% and for shares held for more than 12 months to 12.5 percent from 10 percent.
Short-term capital gains tax (STCG) on listed equity, equity-oriented mutual funds and units of a business trust has been increased to 20 per cent from 15 per cent while Long Term Capital Gains Tax (LTCG) on these securities is proposed to be hiked to 12.5 per cent from 10 per cent.
Long-term capital gains up to Rs 1.25 lakh annually will be exempt from tax, up from Rs 1 lakh currently, as per the changes proposed in the Budget.
In the case of listed bonds and debentures, LTCG is proposed to be reduced to 12.5 per cent from the existing 20 per cent. STCG rate remains unchanged.
In the case of unlisted bonds and debentures, LTCG will be levied at applicable slab rates against a flat 20 per cent rate currently. STCG rate remains unchanged.
In the case of other assets (property, gold etc), LTCG is proposed to be levied at 12.5 per cent without indexation benefits against the existing rate of 20 per cent with indexation. STCG rate remains unchanged.
3. Securities Transaction Tax
The government proposed to hike the securities transaction tax (STT) on futures and options trade to discourage retail investors' participation in the risky instrument.
"It is proposed to increase the rates of STT on the sale of an option in securities from 0.0625 per cent to 0.1 per cent of the option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02 per cent of the price at which such futures are traded," Ms Sitharaman said.
4. TDS Rate On E-Commerce Operators
The government proposed several changes in the tax deducted at source structure, including reducing the rate for e-commerce operators to 0.1 per cent from existing 1 per cent, and allowing TCS credit against TDS deducted on salaries.
"A beginning is being made in the Finance Bill by simplifying the tax regime for charities, TDS rate structure, provisions for reassessment and search provisions and capital gains taxation," Finance Minister Nirmala Sitharaman said.
5. Angel Tax
The government will abolish angel tax for all classes of investors in startups to "bolster the Indian startup eco-system".
"To bolster the Indian startup eco-system, boost the entrepreneurial spirit and support innovation, I propose to abolish the so-called angel tax for all classes of investors," she said.
6. Corporate Tax
The government announced a reduction in the corporate tax rate on foreign companies to 35 per cent to attract foreign capital flow.
It proposed a reduction in the rate of income-tax chargeable on income of foreign companies (other than that chargeable at special rates) from 40 per cent to 35 per cent.
"To attract foreign capital for our development needs, I propose to reduce the corporate tax rate on foreign companies from 40 per cent to 35 per cent," Ms Sitharaman said in her Budget speech.