Author: Khushi J. Prajapati
INTRODUCTION
The Finance Minister Nirmala Sitharaman has presented her seventh straight budget on July 23 2024 for the fiscal year 2024-2025. The tax structure of India has been significantly reformed by the Finance Bill 2024. Direct and indirect taxes will be affected by this legislative update that intends to bring about improved regulations on taxation, better compliance with them, and the overcoming of modern-day economic challenges. The alterations explained in this document aim to enhance income collection, promote economic development, and guarantee equitable taxation.
ABSTRACT
In this analysis, we look at the major amendments put forward in the Finance Bill 2024, emphasizing both direct and indirect taxes. It offers an exhaustive account of changes in personal income tax, corporate tax, Goods and Services Tax (GST) rates, as well as compliance requirements. It analyzes in what way the changes made will affect taxpayers and businesses compared to earlier laws, as well as possible repercussions for the whole economy.
Key Highlights of Direct Tax Proposals of Finance Bill 2024
- Changes in Income Tax Slab Rates under section 115BAC sub-section 1A
NEW SLAB RATES From A.Y.2025-2026 onwards
| TOTAL INCOME | RATE |
| 0-300000 | NIl |
| 300001-700000 | 5% |
| 700001-1000000 | 10% |
| 1000001-1200000 | 15% |
| 1200001-1500000 | 20% |
| Above 1500000 | 30% |
OLD SLAB RATES UNDER NEW REGIME FOR A.Y.2024-2025
| TOTAL INCOME | RATES |
| 0-300000 | NIL |
| 300001-600000 | 5% |
| 600001-900000 | 10% |
| 900001-1200000 | 15% |
| 1200001-1500000 | 20% |
| Above 1500000 | 30% |
- Increased Limit of Standard Deduction and Family Pension Deduction
| SALARIED INDIVIDUALS | FROM 50000 | INCREASED TO 75000 |
| FAMILY PENSION | FROM 15000 | INCREASED TO 25000 |
- TAXATION ON CAPITAL GAINS
- Holding Periods – When classifying assets into either long-run or short-run categories, there will only be two holding periods: 12 months and 24 months. The 36th-month holding period has been eliminated.
- Unlisted Bonds and Debentures – In the past, the tax on these depended on how long they were held. New Rule: All unlisted bonds and debentures are now classified as short-term assets irrespective of the holding period.
- Short-term Capital Gains – Listed Equity Shares, Units of Equity-Oriented Funds, Units of Business Trust: Old Tax Rate: 15%. New Tax Rate: 20%. Other Financial and Non-Financial Assets: taxed as per slab rates.
- Long-term Capital Gains- Shares of Equity, Equity-Linked Units, Units in Business Trusts: Exemptions upped: it has gone up from ₹1 lakh to ₹1.25 lakhs per annum. Tax Rates: Increased from 10% to 12.5%. Beginning Date: Exemptions are for the complete calendar year while the new tax rate will be applicable starting from July 23, 2024.
- Other Financial and Non-Financial Assets: Previous Tax Rate: 20%. New Tax Rate: decreased to 12.5%. Indexation Advantage: withdrawn with effect from July 23rd, 2024.
- Changes in tax rates of foreign companies
The taxes paid by domestic companies and foreign companies on their income in India are called corporate income tax CIT. Taxes on foreign companies have been reduced from 40% to 35%.
- Securities Transactions Tax (STT) Revised
| Types | Previous Rates | Revised Rates | %increase |
| Futures | 0.0125% | 0.02% | 60% |
| Options | 0.0625% | 0.1% | 60% |
- Increased in Deduction Employer’s Contribution To Pension Schemes
| Section | Previous rates | Revised Rates |
| Section 80CCD | 10% | 14% |
- Changes in TDS Rates
- Since TDS rates for certain payments that decrease business operations and improve taxpayer adherence have been decreased in the budget 2024. The new rates will begin on either October 1st, 2024, or April 1st, 2025.
| TDS Sections | Proposed Tds Rates | Effective Date |
| Section 194D | 2% | April 1, 2025 |
| Section 194DA | 2% | October 1, 2024 |
| Section 194G | 2% | October 1, 2024 |
| Section 194H | 2% | October 1, 2024 |
| Section 194-IB | 2% | October 1, 2024 |
| Section 194-M | 2% | October 1, 2024 |
| Section 194 – O | 0.1% | October 1, 2024 |
| Section 194F | omitted | October 1, 2024 |
- OTHER MAJOR CHANGES AND REFORMS IN DIRECT TAX
- TDS on Partners Remuneration
- Abolishment of angel tax
- Introduction of TDS on Payments mode to partners by firms section 194T
- To reduce the junked cases, there was an increase of the monetary limits in filing tax dispute appeals to Rs.60 lakh for tax tribunal, Rs.1 crore for high courts, and Rs.2 crore for supreme court respectively.
- In case where the income that has evaded tax exceeds Rs.50 lakh, any assessment can only be reopened after three years have passed since the end of that assessment year and this period may extend up to a maximum of five years; however, for cases under investigations, this reopening duration is reduced from ten to six years.
KEY HIGHLIGHTS OF FINANCE BILL NO. 2 2024 ON INDIRECT TAXES
- Goods and Service Tax Reforms
Reduction in GST Rates – The GST rate has decreased from 12% to 5% for some essential goods like certain food items and medical supplies. Luxurious Goods: Raised GST rate from 18 % to 28 % for high-end luxurious products including high-value automobiles and expensive electronics.
- Introduction to new slabs – To achieve a balance between revenue generation and consumer affordability, a fresh GST slab of fifteen percent has been introduced for specific goods and services that were previously taxable at eighteen percent.
- Compliance and fillings – A simplified GST return form has been introduced for small and medium enterprises (SMEs) thereby reducing annual returns from twelve to six to ease compliance. The e-invoicing requirements have been expanded to also capture enterprises that earn above ₹10 crores from the previous threshold of ₹5 crores to enhance transparency and minimize manual errors.
- Sector-Specific Reforms
- Real Estate – The aim is to stimulate the housing sector by lowering the GST rate on residential property sales from 12% to 5% without ITC. Commercial Property: The GST rate on commercial property transactions still stands at 12% although there have been changes in input credit rules.
- Tourism and Hospitality – the tax collected on hotel heated spaces that go for less than ₹1000 is brought down from 18% to 5%. Tour Packages: Travelling arrangements for urban centers by travel agents have had their GST charge slashed from 18% to 12%.
- Refunds and Adjustments – Export Refunds: Smoothened processes for refund claims of input tax credit (ITC) on goods exported internationally which will also lead to a shorter processing time and elevated effectiveness levels. ITC on Capital Goods: Strengthened arrangements for demanding tax credits on investments in physical assets to back up initiatives towards constructing infrastructure facilities as well as acquiring machinery used in production activities
- Customs Duties
Reduction in Custom Duties – Raw Materials: Reduction of customs duties on raw materials for industries such as steel and aluminum from 12% to 7% to decrease production costs. Intermediate Goods: Reduction of customs duties on intermediate goods utilized in the manufacturing sector from 10% to 5% aimed at supporting local manufacturers.
Increased customs duties – Customs duties on certain luxury goods, such as high-end automobiles and premium electronics, increased from 15% to 25% to curb non-essential imports and promote local production.
- Other major key points on GST law as per the finance bill
- Enhanced ITC Regulations: Simplifies claiming tax credits so that there are fewer controversies and increased fulfillment.
- Enhanced E-Invoicing: Boosts transparency and minimizes tax fraud through automation of invoices.
- Stricter Penalties: Enhances adherence to laws through more severe sanctions for non-compliance.
- GST Tribunal: Offers a unique platform for speedy resolution of conflicts. Customs Duty Adjustments: Aids in the growth of local firms and simplification of trade operations.
- Revised Export Incentives: Increases exports and improves competitiveness in the international market.
- Faster Tax Refunds: Makes it easy for companies to have cash flow because it hastens refund procedures.
CONCLUSIONS
The passage of the Finance Bill No. 2 of 2024 gives rise to notable modifications which are meant to improve India’s indirect tax system. It proposes simplification compliance and reduction of tax evasion through standardization of GST rates, modernization of input tax credit rules as well as broadening e-invoicing. Setting up a GST Tribunal and imposing tougher penalties will allow resolution of conflicts faster while enhancing compliance with the tax law. The changes in the duties are indeed meant to enable local industries to compete favorably while at the same time promoting external trade. Consequently, this bill seeks to modernize the tax system, enhance transparency, and encourage economic growth to create a more efficient and predictable business environment.
