Amit Poswal | Sr. Correspondent
New Delhi: The full Union Budget for the financial year 2024-25 was presented in the Lok Sabha on Tuesday. Finance Minister Nirmala Sitharaman presented the government’s 11th full budget. During her interim budget speech, she did not make any major changes related to taxation, but this time she has made some significant announcements. The finance minister mentioned that about four crore people would benefit from tax-related measures. In her budget speech, the finance minister said that the government will continue efforts to simplify taxes, improve taxpayer services, provide tax certainty, and reduce litigation.
Announcement of Changes in Tax Slabs under the New Tax System
This time, the finance minister has provided for a 5% tax on income ranging from ₹3 lakh to ₹7 lakh under the new tax system. In her budget speech, the finance minister stated that taxpayers with an income up to ₹3 lakh will not have to pay any tax. For those with an income between ₹7 lakh and ₹10 lakh, a 10% tax has been provisioned. According to the finance minister, the new announcements will benefit around four crore people, providing up to ₹17,500 in savings under the new tax system. Additionally, for pensioners, the deduction on family pensions has been increased from ₹15,000 to ₹25,000. This decision by the government will benefit senior citizens across the country.
Income Tax Rates for Different Income Levels
Up to ₹3,00,000: Nil
₹3,00,001 to ₹7,00,000: 5%
₹7,00,001 to ₹10,00,000: 10%
₹10,00,001 to ₹12,00,000: 15%
₹12,00,001 to ₹15,00,000: 20%
Above ₹15,00,000: 30% (under the new tax system)
Preparation for Dispute Resolution Scheme “Vivad se Vishwas Yojana 2024”
On Tuesday, Finance Minister Nirmala Sitharaman announced plans to increase the capital gains exemption limit on certain financial assets for the middle and upper-middle classes to ₹1.25 lakh annually. While presenting the budget for the financial year 2024-25, she proposed an increase in the Securities Transaction Tax (STT) by 0.02% and 0.1% for futures and options securities, respectively. Sitharaman also mentioned that income from share buybacks would be taxed. To reduce tax disputes, the government is preparing to introduce the “Vivad se Vishwas Yojana 2024.” Additionally, she stated that ₹10 lakh crore has been proposed for the Pradhan Mantri Awas Yojana-Urban 2.0, which aims to meet the housing needs of one crore poor and middle-class families. The Finance Minister also announced the development of 12 new industrial parks under the National Industrial Corridor Development Programme.
Finance Minister Announces Removal of Angel Tax
Finance Minister Nirmala Sitharaman announced the removal of the ‘angel tax’ for all categories of investors in startups on Tuesday. During her budget speech, she also announced various changes in tax rates for some financial instruments concerning e-commerce companies and long-term capital gains. The Finance Minister said, “First and foremost, to strengthen the Indian startup ecosystem, promote the spirit of entrepreneurship, and support innovation, I propose to abolish the so-called angel tax for all categories of investors.”
The removal of the angel tax is expected to boost startups by creating a more favorable environment for them. Sitharaman also proposed completely simplifying income tax provisions for reopening and reassessment to reduce uncertainty and disputes.
She said, “If the unreported income is ₹50 lakh or more, it can be reopened after the end of the assessment year within three years. This period will be a maximum of five years from the end of the assessment year.” The Finance Minister also mentioned, “Even in cases of search, a six-year time limit from the year of the search has been proposed, whereas currently, it is a 10-year time limit. This will reduce tax uncertainty and disputes.” She added that a tax rate of 12.5% will be applied to long-term gains on financial and non-financial assets, while the TDS rate for e-commerce companies will be reduced from 1% to 0.1%
Key Announcements on Taxes in the Budget Speech by the Finance Minister
Unified Tax Exemption for Charity:
Instead of two separate systems for charity cases, there will now be a single tax exemption system.
Standard Deduction Increase:
Under the new tax regime, the standard deduction has been increased from ₹50,000 to ₹75,000.
Reduced TDS for Various Payments:
The TDS rate for various payments has been reduced from 5% to 2%.
Removal of TDS on Mutual Funds Re-Purchase:
The 20% TDS on the re-purchase of mutual funds or UTI has been withdrawn.
Reduced TDS for E-commerce Operators:
The TDS rate for e-commerce operators has been reduced from 1% to 0.1%.
Tax Resolution under “Jan Vishwas 2.0”:
Work continues on the “Jan Vishwas 2.0” for tax resolution.
No TDS on Mutual Fund Re-purchase:
TDS on the re-purchase of mutual funds has been eliminated.
Short-Term Capital Gains Tax Rate:
The short-term capital gains tax rate is set at 20%.
Review of Income Tax Law:
The income tax law will be reviewed within six months.
Removal of Angel Tax:
The angel tax has been abolished.
These measures aim to simplify the tax system, reduce the tax burden on individuals and businesses, and promote investment and growth in various sectors.
Previous Announcements by the Finance Minister Regarding Old Tax Demand Notices
In the interim budget, Finance Minister Nirmala Sitharaman announced that the government would withdraw disputed cases related to direct tax demands (demand notices) pending from 1962 to 2009-10 if the disputed amount was up to ₹25,000. Similarly, for direct tax demands pending between 2010-11 and 2014-15, the government decided to withdraw cases involving amounts up to ₹10,000.
The Finance Minister also extended the deadline for tax benefits on investments in startups and pension funds from March 31, 2024, to March 31, 2025. This extension provided an additional year of tax benefits for those investing in startups. In her interim budget speech, Sitharaman highlighted that direct tax collection had more than tripled over the past 10 years, with a 2.4-fold increase in the number of tax return filers. She also mentioned that the time taken to issue tax refunds after filing income tax returns had decreased significantly, from an average of 93 days to just 10 days.
Commitment to a Prudent Tax System
In her budget speech, the Finance Minister assured taxpayers that their contributions were being used prudently for the country’s development and public welfare. She stated that the government had reduced tax rates and made the system more rational. Under the new tax regime, taxpayers with incomes up to ₹7 lakh now have no tax liability, whereas in the financial year 2013-14, only those with incomes up to ₹2.2 lakh were exempt from tax liability. The Finance Minister emphasized the improvements in taxpayer services over the past five years, highlighting the government’s focus on enhancing these services.
