Finance Minister has announced the latest Financial
budget of India for FY24-25 on 23rd July. A financial budget of the
country, is like one’s household budget, wherein a statement is given of all
the income sources, liabilities debts, and what are the key areas of
expenditure the government shall be focusing on. The areas are largely divided
into agriculture, manufacturing and service sector along with social and
economic development. To be able to
fulfil its tasks, government alters its income source i.e. taxes and other
government duties and charges levied on its citizens every financial year.
CHANGES IN INCOME TAX/ DIRECT TAXES
The recent Indian budget for the fiscal year 2024-25 has brought about notable modifications to the income tax framework. The updates include:
Continuation of Existing Income Tax Rates and Slabs (Old Regime): The current tax rates and slabs under the old regime have been retained to ensure stability in the tax structure for individuals opting for this regime.
Introduction of New Income Tax Regime with Revised Tax Slabs: The new tax regime has introduced revised tax slabs to offer increased relief to taxpayers based on income brackets.
Expansion of Income Tax Exemption Limit: The income tax exemption limit has been raised from ₹3 lakh to ₹5 lakh under the new tax regime, allowing individuals earning up to ₹5 lakh annually to be exempt from income tax. The recent Indian budget for the fiscal year 2024-25 has brought about notable modifications to the income tax framework. The updates include:
Augmentation of Standard Deduction: The standard deduction for salaried employees has been raised from ₹50,000 to ₹75,000 to reduce taxable income and provide additional financial relief.
Proposal to Increase Section 80C Exemption Limit: There is a proposal to raise the Section 80C exemption limit from ₹1.5 lakh to ₹2 lakh to encourage taxpayers to save and invest more while receiving tax relief.
Elevation of Presumptive Taxation Thresholds: The thresholds for presumptive taxation have been increased to benefit more small businesses and professionals, simplifying tax compliance and reducing the tax burden.
Waiver of Tax Demands: Measures have been introduced to waive outstanding tax demands up to certain amounts for specific periods, benefiting a significant number of taxpayers by resolving long-pending tax disputes.
Extension of Tax Benefits: Tax benefits for start-ups, investments by sovereign wealth or pension funds, and specific incomes of International Financial Services Centre (IFSC) units have been extended to March 31, 2025.
Rationalization of Capital Gains Tax: The long-term capital gains tax on certain assets has been reduced from 20% to 12.5%, potentially enhancing attractiveness for investments in these assets and stimulating the capital markets.
THE NEW INCOME TAX SLABS
|
INCOME TAX RANGE
|
TTTAX SLAB RATE
|
|
UPTO 3 LAKHS
|
0%
|
|
3- 6 LAKHS
|
5%
|
|
6-9LAKHS
|
10%
|
|
9-12 LKAHS
|
15%
|
|
12-15 LAKHS
|
20%
|
|
ABOVE 15 LAKHS
|
30%
|
Benefits to Tax Payers
Increase in the income tax exemption limit-from ₹3 lakh to ₹5 lakh, meaning individuals earning up to ₹5 lakh annually are exempt from paying income tax. Additionally, the standard deduction for salaried employees has been raised from ₹50,000 to ₹75,000, reducing their taxable income and offering more disposable income for savings, investments, or consumption.
The enhancement in the standard deduction not only aids in tax savings for employees but also streamlines the tax filing process by eliminating the need for documentation or proof of expenses. This adjustment is also viewed as a measure to counter inflationary effects, ensuring the real value of the deduction is maintained over time. Furthermore, the proposed increase in the Section 80C exemption limit from ₹1.5 lakh to ₹2 lakh aims to promote savings and investments while providing additional tax relief.
Higher Section 80C Limit- The Section 80C exemption limit has been proposed to be increased from ₹1.5 lakh to ₹2 lakh, encouraging savings and investments while providing additional tax relief.
Presumptive Taxation Thresholds-which allows eligible taxpayers to calculate their taxable income based on a presumed percentage of their gross receipts or turnover, has been simplified to ease compliance and reduce administrative burdens for small taxpayers. For businesses, the threshold limit under Section 44AD has been raised from ₹2 crore to ₹3 crore, enabling businesses with turnovers up to ₹3 crore to opt for presumptive taxation. Similarly, for professionals, the threshold under Section 44ADA has been increased from ₹50 lakh to ₹75 lakh, expanding the scope for simplified tax compliance.
Capital gains-tax is imposed on profits from the sale of assets held for an extended period, with the tax calculated based on gains adjusted for inflation using the cost inflation index. The holding period required for an asset to qualify as a long-term asset varies depending on the asset type. The decline in the long-term capital gains tax rate directly translates to augmented after-tax returns for investors. For instance, an investor realizing a long-term capital gain of ₹1,00,000 would now incur taxes of ₹12,500 instead of ₹20,000, leading to savings of ₹7,500. With the increased allure of long-term investments, investors may opt to diversify their portfolios by incorporating a greater array of long-term financial and non-financial assets.
Benefits in GST- The advantages of Goods and Services Tax (GST) include simplified compliance procedures, increased exemption limits for small businesses, reduced GST rates in specific sectors to stimulate industry growth and consumer spending, and streamlined processes for claiming Input Tax Credit (ITC) to minimize tax liabilities.
These measures aim to facilitate easier filing of returns, payment of taxes, and operation of small businesses without the burden of GST compliance. Additionally, the reduction in GST rates on certain items such as electric vehicles, renewable energy equipment, and select healthcare products is intended to enhance affordability and promote economic development.
KEY CHANGES IN CUSTOMS DUTIES
Increase in Customs Duty
●Electronics and Components- Customs duty on certain electronic items and components has been increased to encourage domestic manufacturing and reduce import dependency. This is part of the "Make in India" initiative to boost local production.
●Gems and Jewellery- The customs duty on the export of certain types of gems and jewellery has been raised. This measure aims to curb the export of raw materials and encourage value addition within the country.
Decrease in Customs Duty
●Raw Materials for Renewable Energy: To promote the renewable energy sector, customs duty on specific raw materials used in the manufacture of solar cells, modules, and batteries has been reduced. This reduction is intended to lower the cost of renewable energy production and support India's green energy goals.
●Inputs for Electronic Manufacturing: Customs duty on certain inputs and raw materials used in the electronics manufacturing sector has been reduced. This is expected to lower production costs and make Indian electronics more competitive in the global market.
CONCLUSION: The Latest budget is aimed at easing out the process of tax collections by reducing compliances and tedious and complex calculations methods. It also protects the every rising and major spending “middle-class of India”, alongside focusing on key areas to incentivize domestic production and growth. However,
income tax filing can be tough in for common-man. Thus to Lex N Tax Associates provides for expert services for all your tax related problems. From maintenance of tax reports, accounts and book keeping, filing the return and claim the returns and deductions, Lex N Tax Associates is your one stop Tax consultant for reliable and proficient services.