Budget 2024 Highlights Income Tax: In India, people look forward to Budget Day with great anticipation, as businesses and the public alike are anxious to learn about the policies and programs that may be of use to them. The announcement of Budget 2024 was made on February 1, which is later than normal this year due to the elections.
Direct Tax Proposals
The new regime offers an enhanced limit on the standard deduction and the family pension deduction.
Under the new system, the standard deduction for salaried individuals has increased from Rs. 50,000 to Rs. 75,000. Similarly, if individuals file taxes under the new system, the deduction for family pensions for those with pension income has been raised to Rs. 25,000 from Rs. 15,000.
Changes in Tax Structure Under the New Regime
Under the new tax regime, the tax structure is revised as follows:
| Income Tax Slabs | Tax Rate |
| ₹0-3 lakh | Nil |
| ₹3-7 lakh | 5% |
| ₹7-10 lakh | 10% |
| ₹10-12 lakh | 15% |
| ₹12-15 lakh | 20% |
| Above ₹15 lakh | 30% |
Note: A salaried employee under the new tax regime may save up to Rs. 17,500 in taxes as a result of the earlier-mentioned adjustments.
Simplification of Taxation of Capital Gains
- There will only be two holding periods—12 months and 24 months—to divide assets into long-term and short-term categories. There is no longer a 36-month holding period.
- All listed securities have a 12-month holding term. All mentioned securities are regarded as long-term if they are held for more than a year. All other assets are held for 24 months.
- Debentures and unlisted bonds are taxed similarly to market-linked debentures and debt mutual funds. Capital gains tax will apply to them at the appropriate slab rates. (In other words, they will be considered short-term regardless of the duration of their holding.)
- For listed equity shares, a unit of an equity-oriented fund, and a unit of a business trust, the short-term capital gain tax rate has risen from 15% to 20%. The tax slab rates will still apply to other financial and non-financial assets that are held for a short time.
- To aid the lower and middle classes, the yearly cap on the exemption of Long-Term Capital Gains on the transfer of equity shares, equity-oriented units, or Business Trust units has been increased from Rs. 1 lakh to Rs. 1.25 lakh. However, the tax rate has increased from 10% to 12.5%.
- The tax rate changed on July 23, 2024, although the exemption limit of Rs. 1.25 lakhs has been raised for the entire year.
- On other financial and non-financial assets, the long-term capital gains tax is lowered from 20% to 12.5%. However, the indexation benefit that was formerly offered upon the sale of long-term assets has been eliminated. Therefore, starting on July 23, 2024, every sale of a long-term asset will only be subject to a 12.5% tax rate without the benefit of indexation.
- However, it is to be noted that the provision regarding availing the benefit of the FMV of an asset as of 01.04.2001 as a cost while selling the asset is still available even after the recent changes.
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Changes in TDS Rates
The TDS rates on certain payments were lowered in Budget 2024 to promote taxpayer compliance and ease business operations. TDS rates, however, only take effect from October 1, 2024, or April 1, 2025. The specified payments are displayed in the table below.
| TDS Sections | 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 a 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 | |
Section 194T, the Introduction of TDS on Payments Made by Firms to their Partners
This budget included a new TDS provision for payments to partners made by the firms (i.e., it applies to both partnership firms and LLPs) in the form of commission, interest, bonus, or salary.
Consequently, under Section 194T, any payment made by the corporation, as mentioned above, greater than Rs. 20,000 will now be subject to TDS at 10%.
TDS on Partners Remuneration
Budget 2024 includes a new provision allowing TDS to be deducted on certain payments made by a company to a partner under section 194T. According to the regulation, if the partner’s compensation exceeds Rs 20,000 in the fiscal year, 10% TDS must be withheld. This clause will go into force on April 1st, 2025. Learn more about the 194T Section.
Abolishment of Angel Tax
It has been suggested that the Angel tax provisions found in Section 56(2)(viib) be removed.
A levy known as the “angel tax” is imposed on businesses that sell new shares to investors for more than their fair market value. The company was required to pay angel tax under Section 56(2)(viii) on the excess of the issue price over and above the FMV. It is suggested that this clause be deleted.
Given the frequency of fundraising that can occur in startups, the expense of compliance, and the time required by the earlier mentioned rule when executing fundraising in a startup, the startup ecosystem will benefit.
Corporate Taxes on Foreign Companies
Corporate taxes are based on the profit or net income of the business. Finance Minister Nirmala Sitharaman has suggested lowering the corporate tax rate on foreign corporations from 40% to 35% in the Budget 2024.
Increased Employer Contribution Deduction to the Pension Scheme
Up to 10% of the employer’s pension plan contribution is deductible under Section 80CCD. The maximum deduction amount has been raised to 14% of the employee’s pay from the prior year in Budget 2024.
STT on Futures and Options
The Securities Transaction Tax (STT) has been raised from 0.0125% to 0.02% for futures and from 0.0625% to 0.1% for options.
Other Direct Tax Updates
- Reopening of ITR—If the amount of income that was avoided is at least Rs 50 lakh, an assessment may be reopened after three years, up to a maximum of five years. The ten years are shortened to six years in search case situations.
- Income Tax Appeals—The financial thresholds for submitting tax dispute appeals in tax tribunals, high courts, and supreme courts have been increased to Rs. 60 million, Rs. 1 crore, and Rs. 2 crore, respectively, to decrease the number of ongoing cases.
- Vivaad se Vishwas Scheme—This scheme has been brought back to help resolve income tax disagreements and avoid going to court.
Conclusion – Budget 2024 Highlights Income Tax
The Budget 2024 has brought several noteworthy changes and updates in the realm of income tax that aim to streamline the tax structure and provide relief to various sections of taxpayers. From adjustments in tax slabs to enhanced deductions and incentives for savings and investments, these measures are designed to boost economic growth and promote financial well-being. As we move forward, it will be essential for taxpayers to stay informed about these changes and understand how they impact their financial planning. The Budget 2024 underscores the government’s commitment to fostering a more equitable and efficient tax system, paving the way for a robust economic future.