3 Key Income Tax Modifications Introduced in the Interim Budget of 2024.

Interim Budget

3 Key Income Tax Modifications Introduced in the Interim Budget of 2024

Additionally, it was stated in the budget speech that there are no planned rate adjustments for direct taxes.

The interim budget has implemented the following adjustments on income tax.

Interim Budget

Partial Withdrawal of Outstanding Direct Tax Demands: Limits for FY 2009-10 and FY 2010-11 to 2014-15

Due to the online ITR processing, CPC Banglore has been posting previous demands on taxpayers’ Income Tax Portals. It was discovered that these demands were incorrect on several occasions. The government failed to speed the process to withdraw the demand, which led to the taxpayers site displaying tax and interest on these demands. If the taxpayer was entitled to a refund, these requests prevented the refund from being processed, and in certain situations, the refund was changed to reflect these demands. The government’s decision to remove these requests is a positive one. According to the budget address, around one crore tax payers should profit from this.

Extension of Tax Incentives originally expiring on 31-3-2024 to 31-3-2025

a) Section 80IAC allowed eligible start-ups incorporated between April 1, 2016, and March 31, 2024, to claim a 100% deduction on profits and gains from their business for three consecutive assessment years.

b) Section 10(4D) pertained to specified income, derived from the transfer of capital assets, by specified Alternative Investment Funds (AIFs) located in any International Financial Services Centre (IFSC) or the investment division of offshore banking units. This provision applied if the fund commenced operations on or before March 31, 2024.

Interim Budget

c) Section 10(4F) provided an exemption for non-resident income, such as royalty or interest from leasing aircraft or ships, paid by a unit of an IFSC. This exemption applied if the IFSC commenced its operations on or before March 31, 2024.

d) Section 10(23FE) granted an exemption for the income of a specified person in the form of dividends, interest, or specified sums received by a unit holder from a business trust. This exemption applied to long-term capital gains arising from investments made in India, whether in the form of debt, share capital, or units. The investment must be made on or after April 1, 2020, but on or before March 31, 2024, subject to certain conditions.

e) Section 80LA provided a deduction under section 80LA(1A) for any income generated by an International Financial Services Centre (IFSC) unit through the leasing activities of aircraft or ships. This deduction was applicable if the IFSC commenced its operations on or before March 31, 2024.

f) Sections 92CA, 144C, 253, and 255 empowered the government to issue directions until March 31, 2024.

Note: It’s crucial to highlight that there is no extension of the time limit specified in Section 115BAB and Section 115BAE. Section 115BAB offers a concessional tax rate (15%) for income earned by new manufacturing domestic companies, and Section 115BAE provides a similar concessional tax rate (15%) for new manufacturing co-operative societies. Both provisions apply if manufacturing commences by March 31, 2024.

Amendments to Section 206C

The Finance Act of 2023 implemented a retrospective increase in the Tax Collected at Source (TCS) rate for the Liberalised Remittance Scheme (LRS) and overseas tour packages. The rate was elevated from 5% to 20%, with effect from July 1, 2023, and officially enforced from October 1, 2023.

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Interim Budget 2024-25 Income Tax Updates

Interim Budget

Interim Budget 2024-25 Income Tax Updates

“Keeping with the convention, I do not propose to make any changes relating to taxation and propose to retain the same tax rates for direct taxes and indirect taxes including import duties.”

Interim Budget

Presenting the Interim Budget 2024–25 in Parliament, Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman stated, “Keeping with the convention, I do not propose to make any changes relating to taxation and propose to retain the same tax rates for direct taxes and indirect taxes including import duties.”

The Union Finance Minister proposed extending some tax benefits to start-ups and investments made by sovereign wealth or pension funds, as well as tax exemption on certain income of specific IFSC units, until March 31, 2025, in order to ensure tax continuity.

Smt. Sitharaman proposed that many small, unverified, unreconciled, or disputed direct tax demands—many of which date back to 1962—be relieved in accordance with the government’s goal of improving living and business conditions. She suggested that such outstanding direct tax demands be withdrawn up to ₹25,000 for the period up to the financial year 2009–10 and up to ₹10,000 for the financial years 2010–11 to 2014–15. It is anticipated that this will help roughly one crore taxpayers. 

Major Modifications to Direct Tax Under the Finance Bill 2024

1. No modifications to the income tax rates, surcharge, income tax threshold limits, deductions, or exemptions allowed under the previous and current tax regimes.

2. The rates for corporations, firms/LLPs, and cooperative societies remain unchanged.

3. Extension of the exemption to the sovereign wealth fund, pension fund, or fully owned subsidiary of the Abu Dhabi Investment Authority (ADIA): Dividends, interest, and long-term capital gains received from a pension fund, sovereign wealth fund, or fully owned subsidiary of the ADIA were all exempt from taxes. But only if the investment was made between April 1, 2020, and March 31, 2024, was the aforementioned exemption applicable. The Finance Bill 2024 suggests extending the investment deadline to March 31, 2025.

4. The deadline for incorporating the Faceless Scheme for Dispute Resolution Panel under Section 144C, the Faceless Scheme for Income Tax Appellate Tribunal under Section 253, the Faceless Scheme for Transfer Pricing Officer under Section 92CA, and the Consequential Procedure of Appellate Tribunal under Section 255 has been extended from March 31, 2024 to March 31, 2025.

 

Tax Demand Settlement Amnesty

  • Tax demands outstanding up to Rs. 25,000 pertaining to the period up to FY 2009-10; and
  • Tax demands outstanding up to Rs. 10,000 for FY 2010- 11 to 2014-15.

Extension of Deadline March 31, 2024 to March 31, 2025 for:

1. Startups qualified for deduction under Section 80IAC

2. Designated fund as per Section 10(4D); and

3. A non-resident individual who receives revenue in the form of royalties or interest from the leasing of a ship or aircraft to an International Financial Services Center unit in the preceding year, as permitted by section 80LA.

Significant Milestones Highlighted in the Interim Budget 2024-25

1. Over the past decade, direct tax collections have tripled, and the number of return filers has increased by 2.4 times.

2. The new tax scheme now exempts taxpayers with income up to ₹7 lakh from any tax liability, a substantial increase from ₹2.2 lakh in the 2013-14 financial year.

3. The presumptive taxation threshold for retail businesses has been raised from ₹2 crore to ₹3 crore, while professionals eligible for presumptive taxation now have a threshold of ₹75 lakh, up from ₹50 lakh.

4. Additionally, the corporate tax rate has been reduced from 30% to 22% for existing domestic companies and further reduced to 15% for specific new manufacturing companies.

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Major Highlights of the Interim Budget 2024

Interim Budget

Major Highlights of the Interim Budget 2024

Interim Budget

1. For 2023–2024 (FY24), the government’s shortfall between its receipts and outlays is projected to be 5.8% of GDP, or the revised fiscal deficit. A 5.1% GDP fiscal deficit is anticipated for FY25. In 2025–2026 (FY26), the goal is to bring the fiscal deficit down to less than 4.5% of GDP.

2. Income tax slabs remain unchanged.

3. The government has made a significant announcement by agreeing to waive unpaid direct tax claims up to Rs 25,000 for the years 2009–10 and up to Rs 10,000 for the years 2010–11 through 2014–15.

4. According to Sitharaman, the number of tax filers increased by 2.4 times. Since 2014, the amount collected in direct taxes has tripled. The estimated tax revenue for 2024–2025 is Rs 26.02 lakh crore.

5. Two crore new homes would be included in the Pradhan Mantri Awas Yojana – Gramin (PMAY-G) according to the Finance Minister.

6. This will be a great age for our tech-savvy children. With the provision of a 50-year interest-free loan, a corpus of Rs. 1 lakh crore will be established. Long-term financing and re-financing with extended terms and low or no interest rates will be made available by the corpus. This will incentivize the private sector to considerably increase research and innovation in early-stage industries.

7. “Create programs that harness the power of technology and our young people.” In order to accelerate Atma Nirbharta and improve deep tech technology for defense, a new plan will be introduced.

8. Sitharaman also declared his intention to use the “existing hospital infrastructure under various departments” to establish other medical institutions.To look into the problems and provide recommendations that are pertinent, a committee will be formed for this purpose.

Interim Budget

9. Their dignity has been improved by outlawing triple talaq, allocating one-third of the seats in the Lok Sabha and state assemblies to women, and providing over seventy percent of the dwellings in rural regions under the PM Awas Yoajana to women.

10. “One crore families will be able to receive up to 300 units of free electricity per month through roof-top solarization. This plan is in line with the Prime Minister’s determination on the historic day of Shri Ram Mandir’s Ayodhya dedication. By 2070, the government wants to reach “net zero.”

11. “Long-term interest-free loans to be provided to States to encourage development” is a plan to boost tourism.

12. Sitharaman began her address by pointing out that for the past ten years, there has been positive change in the Indian economy.

13. “The needs and aspirations of the poor, women, youth, and farmers will guide the country’s growth.”

14. By 2047, the government wants to have transformed India into “Viksit Bharat.””Sabka sath, sabka vikas” is our main concern.

15. GDP is a priority for the government, along with governance, development, and performance.

16. “Our government is working with an approach to development that is all-round, all pervasive, and all inclusive,” stated the Finance Minister in reference to social justice.

17. The Ministry of Finance forecast that the Indian economy would grow at a rate of more than 7% in the upcoming years and that, with a $5 trillion GDP, it will rank third in the world in the next three years in a review report released prior to the interim budget.

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