In the first full Budget of the Modi 3.0 Government, the Hon’ble Finance Minister highlighted nine priority areas aimed at transforming India into a developed country by 2047 - its 100th year of independence.
Underscoring the Government's commitment to long-term economic growth and sustainable development, the nine Budget priorities include: Productivity and Resilience in Agriculture, Employment and Skilling, Inclusive Human Resource Development, Social Justice, Urban Development, Energy Security, Infrastructure, Innovation, Research and Development, and Next Generation Reforms.
On the heels of the Economic Survey 2024 that pegs GDP growth this year between 6.5% and 7% amid global challenges, the Union Budget 2024 is considered a vital plan of the Government’s roadmap for India’s development over the next five years.
Here’s a quick highlight of the key proposals from Budget 2024:
- Income from buyback of shares proposed to be taxed as ‘dividends’ in shareholder's hands. Acquisition cost is to be treated as capital loss
- Vivaad Se Vishwas Scheme, 2024 proposed for settlement of ongoing tax disputes and is likely to help lower the pendency of appeals and reduce litigation.
- Equalisation Levy 2.0 is not applicable on consideration received for e-commerce supply or services on or after 1 August 2024, thereby significantly impacting cross-border supply of services.
- Corporate tax rate on business income for foreign companies proposed to be reduced from 40% to 35%, to bring parity between domestic and international companies.
- Angel tax abolished with effect from FY 2024-25. This could create a strong impact on FDI inflows as well as positive foreign investor sentiments.
- Rationalisation of Capital Gains
- Only two holding periods - 12 months (for all listed securities) and 24 months (other assets)
- Certain classes of STCG to be taxed at 20%
- Certain classes of LTCG to be taxed at 12.5%
- Indexation benefit available on the calculation of LTCG proposed to be removed
- Parity in taxation between resident and non‑resident taxpayers
- Withholding tax rates on certain income components proposed to be reduced to 2%; withholding tax on payments by e-commerce operators to participants to be reduced from 1% to 0.1%. This could help e-commerce operators in a highly competitive market.
- Enhancement in standard deduction along with the rejig in tax slabs under the New Tax Regime, aimed at creating a preference for this Regime.
- Thin capitalisation regulations are not applicable for interest paid to finance companies located in IFSC, encouraging the IFSC as a preferred investment destination.
- GST law amended to give effect to recommendations of the GST Council, illustratively:
- Extension of time limit for availing ITC for FY 2017-18 to FY 2020-21;
- Exclusion of Extra Neutral Alcohol from GST;
- Introduction of amnesty scheme.
- Timeline to issue SCN unified at 42 months from the date of filing annual returns from FY 2024-25 in all cases.
- ITC allowed irrespective of the tax liability arising due to fraud etc., for periods starting from FY 2024-25, replacing earlier provisions restricting ITC where the tax liability arose from frauds.
- For claiming benefits under Free Trade Agreements, certification or declarations for “proof of origin” are required instead of "certificates of origin" to align with international trade agreements.
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