Direct Tax Reforms
The Union Budget 2024-25 has brought in big-ticket reforms in direct taxes aimed at making life easier for individual and corporate taxpayers. Some of the major highlights are as follows:
- Simplified Tax Regime: Much appreciation is being poured for the budget due to its simplest tax regimes, sans exemptions and deductions, that benefit a vast majority of taxpayers.
- Higher Deductions: The basic standard deduction for salaried employees has been increased to ₹75,000 from the current ₹50,000 for those opting for the new tax regime. For pensioners, family pension deductions would be higher.
- Extended Period for Assessment: Now, assessments can be reopened up to 5 years if the escaped income is in excess of ₹ 50 lakh, making it clear what the tax liabilities are.
PC: Business Standard
Indirect Tax Reforms
Reduction in customs duties and rationalisation of the GST structure for facilitating ‘Make in India’ and ease of tax administration:
- GST Rationalisation: Comprehensive review of the GST tax structure for reducing compliance burden and making its applicability more pervasive.
- Revision in Custom Duty: Reductions in BCD on items of essential imports, in particular, mobile phones and critical minerals, shall go a long way in incentivizing sectors like healthcare, electronics, and manufacturing.
Corporate Taxation and Investment
It has introduced various initiatives to attract foreign capital and encourage entrepreneurship with the view of attaining economic growth. These include the following:
- Corporate Tax Cuts: Bringing down corporate tax rates for foreign companies from 40 percent to 35 percent to make India more attractive to foreign investors.
- Abolition of Angel Tax: Start-up Ecosystem All investors to be exempt from angel tax to encourage entrepreneurship and innovation in the start-up sector.
Capital Gains and Financial Assets
The changes in capital gains taxation are aimed at making the regime more equitable to investors:
- Capital gains tax: Reduction in tax rates on long-term gains in both financial and non-financial assets; increase in exemption limit that benefits lower and middle-income groups.
- Classify Assets Clearly: There shall be clear guidelines for the classification of assets between short- and long-term holdings so that there is no misunderstanding amongst investors.
Customs Duty Adjustments for Key Sectors
Changes in customs duty would be made with a view to support specified sectors and to promote exports, including:—
- Health care: Customs duty on certain critical cancer medicines is fully exempted from the duty to help reduce the treatment cost to patients.
- Manufacturing: The exemption and reduction in customs duty on components like solar panel manufacturing equipment and rare earth minerals can be provided to ensure the growth of domestic production capabilities.
Environmental and Sectoral Implications
The budget addresses environmental and sector-specific concerns in so far as by way of adjustments in customs duty on the following:
- Environmental: Increase in BCD on environmentally hazardous material like PVC flex banners to discourage their usage.
- Sectoral Support: The reduction in BCD on seafood exports, textiles, and electronics will help gain competitiveness in world markets.
The Union Budget 2024-25 has very holistically reflected the approach to tax reform and economic stimulus, which is oriented towards simplification, incentivization of domestic manufacturing, and balm for key sectors, so as to give an impetus to growth, reduce compliance burdens, and make the environment congenial to both domestic and foreign investments.
