Comprehensive Budget 2024 (With Latest Amendment)

Posted On August 8, 2024August 9, 2024

The Union Budget for the financial year 2024-25, presented by Finance Minister Nirmala Sitharaman on July 23, 2024, outlines the government’s priorities and spending plans. This budget, significant as the first of the newly elected government, focuses on several key areas to drive India’s growth and development.

The budget emphasises nine priority areas:

• Productivity and resilience in Agriculture
• Employment & Skilling
• Inclusive Human Resource Development and Social Justice
• Manufacturing & Services
• Urban Development
• Energy Security
• Infrastructure
• Innovation, Research & Development and
• Next Generation Reforms

Direct Tax Reforms

   Simplifying and Rationalizing of Capital Gains Taxation

• The proposed changes aim to significantly simplify capital gains taxation.
• Short-term gains on specified financial assets will now be taxed at 20% (earlier it was 15% under 111A), while all other financial and non-financial assets will continue to follow the current tax rates.
• Finance Minister Nirmala Sitharaman revealed changes to the Long-Term Capital Gains tax on real estate, giving taxpayers the choice to either use the previous system or benefit from reduced rates without indexation. The new rate is 12.5%, a decrease from the previous 20%. Additionally, to benefit the lower and middle-income groups, the exemption limit for capital gains on certain financial assets will be increased to ₹1.25 lakh (Earlier it was 1 Lakh per year) per year.
• Financial assets listed for more than a year will be considered long-term. Unlisted financial assets and all non-financial assets must be held for at least two years (earlier it was 3 years) to qualify as long-term.
• Unlisted bonds, debentures, debt mutual funds, and market-linked debentures will be taxed on capital gains at applicable rates, regardless of the holding period.

Individual Income Tax

• Enhanced the limit of Standard Deduction: – Concerning Individual Income Tax Rates for those opting for the new tax regime, the standard deduction for salaried employees will be increased from ₹50,000 to ₹75,000. Additionally, the deduction on family pension for pensioners will be raised from ₹15,000 to ₹25,000.

Revised Tax Restructure under the New Tax Regime

Changes in TDS Rates

It is proposed to reduce TDS rates from 5 per cent to 2 per cent in certain sections and eliminate section 194F, which currently has a TDS rate of 20 per cent, as detailed below.

TDS on Payment to Partners

It is proposed that payments made by a firm to its partner, including salary, remuneration, commission, bonus, and interest, will be subject to TDS at a rate of 10% for aggregate amounts exceeding ₹20,000 in a financial year.

Corporate Taxes on Foreign Companies

In the 2024 Budget, Finance Minister Nirmala Sitharaman has proposed reducing the corporate tax rate on foreign companies from 40% to 35%.

Enhanced Deduction for Employer Contributions to Pension Schemes

Section 80CCD offers a deduction for the employer’s contribution to the pension scheme up to 10%. The Budget 2024 has raised this deduction limit to 14% of the employee’s salary (Basic+DA) from the previous year.

                              Indirect Tax Reforms

Reductions and Exemptions in Customs Duties for Essential Goods

Other GST Reforms and Amendments

• Un-denatured Neutral Alcohol used in manufacturing alcoholic liquor for human consumption will be excluded from the scope of GST. (Amendments to Sec 9 of the CGST Act, Sec 5 of the IGST Act, and Sec 7 of the UTGST Act).

• Section 74A addresses tax not paid, underpaid, erroneously refunded, or input tax credit wrongly availed or utilized starting from the Financial Year 2024-25. Under this new section, if any tax is unpaid, underpaid, erroneously refunded, or if the input tax credit is wrongly availed or utilised, the proper officer will serve a notice to the responsible person, requiring them to explain why they should not pay the due amount with interest and penalty. However, no notice will be issued if the amount in question for a financial year is below Rs. 1,000. The notice must be issued within 42 months from the due date of the annual return or the date of the erroneous refund.

• The same limitation period applies for issuing demand notices and orders for demands from the financial year 2024-25 onwards. The time limit for taxpayers to benefit from reduced penalties under this section, by paying the tax demanded along with interest, is extended from 30 days to 60 days.

• Section 11A is inserted to empower the government to regularize non-levy or short levy of central tax due to prevalent trade practices.

• Section 13(3) is amended to set the time of supply as the date of invoice when the invoice is issued by the recipient of the supply.

• Sub-section (5) is added to Section 16, effective retroactively from July 1, 2017, to allow ITC claims on invoices or debit notes for FY 2017-18, 2018-19, 2019-20, and 2020-21 in the GSTR-3B filed up to November 30, 2021. Additionally, sub-section (6) is inserted in Section 16, also effective retroactively from July 1, 2017, to permit ITC claims on invoices and debit notes in GSTR-3B filed for the period from the GST registration cancellation date or the effective date, as applicable, until the date of the revocation order for GST registration cancellation, provided it is filed within thirty days of the revocation order date. However, the time limit for ITC claims for such documents must not have expired under Section 16(4) as of the date of the cancellation order. If the tax is paid or the ITC is reversed, no refund will be accepted.

• A new provision is added under the blocked credits in Section 17(5), disallowing ITC on taxes paid under Section 74 for demands up to FY 2023-24, and removing references to Sections 129 and 130 of the CGST Act.

• A new proviso in sub-section (2) of section 30 of the CGST Act is inserted, adding conditions and restrictions for the revocation of GST registration cancellation, which will be prescribed in the CGST Rules later.

• Section 31(3)(f) is amended to provide a time limit for issuing invoices by the recipient for RCM supplies, including suppliers registered solely for TDS under GST.

• GSTR-7 for TDS under GST must be filed whether or not TDS is deducted during a month under Section 39(3).

• Section 54(15) specifies that GST refunds of unutilized ITC or IGST will not be allowed for zero-rated supplies of goods subject to export duty.

• A summoned person can authorize another person to appear on their behalf in compliance with GST summons issued by the GST officer under the new Section 70(1A).

• New Sections 73(12) and 74(12) restrict the applicability of demand and recovery provisions for determining tax demands for FY up to 2023-24.

• Under the new Section 74A, the penalty will be reassessed in a notice if it is established that the case no longer involves fraud, willful misstatement, or suppression of facts.

• Under Section 107 of the CGST Act, the maximum pre-deposit required for filing appeals before the appellate authority is reduced from Rs. 25 crores to Rs. 20 crores. Likewise, Section 20 of the IGST Act is amended to lower the pre-deposit amount from Rs. 50 crores to Rs. 40 crores.

• The government may specify the types of cases to be heard by the Principal Bench of the Appellate Tribunal through an amendment to Section 109.

• Effective August 1, 2024, taxpayers will have until the later of either the date of the order’s communication or a date specified by the government based on Council recommendations to file an appeal with the Appellate Tribunal. This change also applies to commissioners and GST officers filing applications before the Appellate Tribunal. Applications may be submitted within three months after the standard appeal period expires. The pre-deposit requirement for appeals is reduced from 20% to 10% of the disputed amount, and the maximum pre-deposit amount is lowered from Rs. 50 crore to Rs. 20 crore.

• The penalty under Section 122(1B) is amended to apply only to cases involving e-commerce operators subject to TCS under GST, effective retrospectively from 1st October 2023.

• Conditional waiver of interest and penalty is provided through Section 128A for demand notices under Section 73 for all FY from 2017-18 to 2019-20, except for erroneous refunds and where interest/penalty is already paid for the said years.

• The appellate authority replaces the anti-profiteering authority from a date to be notified for accepting applications for cases of anti-profiteering under Section 171.

New items through Paras 8 and 9 are inserted under Schedule III to declare the following as neither supply of goods nor supply of services:

• The activity of apportioning co-insurance premiums by the lead insurer to the co-insurer for the insurance services jointly supplied by the lead insurer and the co-insurer to the insured in coinsurance agreements, provided the lead insurer pays the tax liability on the entire premium paid by the insured.

• Services provided by the insurer to the reinsurer, where the ceding commission or reinsurance commission is deducted from the reinsurance premium paid by the insurer to the reinsurer.
• Section 146 specifies that no refund shall be issued for tax paid or input tax credit reversed if these amounts would not have been paid or reversed had clause 114 been in effect at all relevant times.

Important note: All amendments to direct and indirect taxes will take effect once they are notified by the CBDT or CBIC, respectively.

Speech by Mrs. Nirmala Sitharaman of Budget 2024-25 (Download PDF): https://www.indiabudget.gov.in/doc/budget_speech.pdf