Post elections and formation of Central Government, Final Union budget, 2024 was presented by Hon’ble Union Minister for finance and corporate affairs in July, 2024. The Union budget was focused on identified priorities that expedite the journey towards the Viksit Bharat. The budget was focused on making taxes simplified for the taxpayers and reduce areas of litigations.

It was pointed out that more than 2/3rd of the taxpayers have opted for the new personal income tax regime in the last financial year. For Income tax domain, the Union budget introduced revised tax slabs, enhanced deductions, simplified calculations of capital gains, abolition of Angel tax etc.. 

Comprehensive analysis of Income Tax Amendments introduced in The Finance (No. 2) Bill, 2024 is carried out in this article:

1. Revised Tax Slab rates:

• The Union Budget has recommended to change the tax slabs for new regime in the following manner:

Current		Proposed
Income Bracket	Tax Rate under New Regime	Income Bracket	Tax Rate under New Regime(Proposed)
0-3,00,000	NIL	0-3,00,000	NIL
3,00,000-6,00,000	5%	3,00,001-7,00,000	5%
6,00,001-9,00,000	10%	7,00,0001-10,00,000	10%
9,00,001-12,00,000	15%	10,00,001-12,00,000	15%
12,00,001-15,00,000	20%	12,00,001-15,00,000	20%
More than 15,00,000	30%	More than 15,00,000	30%

• Further, the budget has also proposed to increase the standard deduction available from salary income from INR 50,000 to INR 75,000.
• Such changes in slab rates and higher standard deduction shall reduce the tax liability.
• Impact of the proposed changes on income tax liability of the taxpayer can be understood with following illustrations:

Total Income	Current Slab under New Regime		Proposed Slab under New Regime		Net Tax Saving
	Taxable Income	Tax Liability	Taxable Income	Tax Liability
8,00,000	7,50,000	31,200	7,25,000	23,400	7,800
10,00,000	9,50,000	54,600	9,25,000	44,200	10,400
12,00,000	11,50,000	85,800	11,25,000	71,500	14,300
15,00,000	14,50,000	1,45,600	14,25,000	1,30,000	15,600
20,00,000	19,50,000	2,96,400	19,25,000	2,78,200	18,200
25,00,000	24,50,000	4,52,400	24,25,000	4,34,200	18,200

• Therefore, the proposed changes shall cause the maximum tax saving of INR 18,200/-.

2. Increase in tax rate on short term capital gain

• As per Section 111A of Income Tax Act, any short term capital gain arising from transfer of equity shares, on which security transaction tax (STT) is paid, is liable to Income tax @ 15%.
• Union budget 2024 has proposed that any short term capital gain arising from transfer of listed equity shares after 23rd July, 2024 shall be liable to Income tax @ 20%.
• Considering the regular movements in share market these days, such provision shall have the major impact on the tax liability of investors.

3. Increase in Tax rate on Long Term Capital Gain on transfer of equity shares

• As per Section 112A of Income Tax Act, any long term capital gain arising from transfer of equity shares, on which STT has been paid, is exempted upto INR 1,00,000. Capital gain over and above INR 1,00,000 is liable to tax @ 10%.
• Union budget has proposed to increase such exemption threshold from INR 1,00,000 to INR 1,25,000 from FY 2024-25 itself.
• Further, rate of tax on such LTCG shall increase from 10% to 12.5%.

4. Reduced tax rate on long term capital gain on transfer of other assets

• As per Section 112 of Income tax Act, any long term capital gain arising from transfer of capital assets is liable to Income tax @ 20% subject to indexation.
• However, to simply income tax provision, union budget has proposed to reduce tax rate on LTCG from 20% to 12.5% without any benefit of indexation.
• Impact of such amendment can be understood with following illustrations:
  • Date of Purchase: 01.01.2002
  • Cost of Acquitsition: INR 1,00,000
  • Date of sale: 01.01.2025
  • Sales Consideration: INR 5,00,000
  • Income Tax liability (current):

Cost of Acquistion	1,00,000
Indexed Cost of Acquisition (1,00,000*363/100)	3,63,000
Sales Consideration	5,00,000
Long Term Capital Gains	1,37,000
Income Tax Liability (@ 20%)	27,400

• Income Tax Liability (As proposed)

Cost of Acquistion	1,00,000
Sales Consideration	5,00,000
Long Term Capital Gains	4,00,000
Income Tax Liability (@ 12.5%)	50,000

• Such reduced tax rate may turned out to be beneficial where asset is purchased recently and the benefit of indexation is not substantial. However, in other cases, such amendment may increase income tax liability of the taxpayer.

5. Abolition of Angel Tax Provision

• Section 56(viib) of Income Tax Act provides that if a closely held company receives consideration, from a resident, for issuance of shares and such consideration exceeds the fair market value of the shares then such excess amount shall be considered as “Income from other sources”.
• Provisions of Section 56(viib) is known as “Angel Tax” provision.
• Union budget 2024 has proposed to remove Section 56(viib) with effect from 1st April, 2025.
• This move will reduce the tax burdens of the startups and will allow them to grow and focus on development.

6. Reduced rate of TDS

The Union budget has proposed to reduce TDS rates on following transactions to streamline the TDS landscape and provide relief to the taxpayer:

Section and Nature of Payment	Existing Rate of TDS	Proposed rate of TDS(With effect from 1st October, 2024)
194D- Insurance Commission	5%	2%
194F- Payments on account of repurchase of units by Mutual Fund or Unit Trust of India	20%	Omitted
194G-Commission, etc., on the sale of lottery tickets	5%	2%
194H- Commission or Brokerage	5%	2%
194-IB-Payment of rent by certain individuals or Hindu undivided family	5%	2%
194M-Payment of certain sums by certain individuals or Hindu undivided family	5%	2%
194-O- Payment of certain sums by e-commerce operator to e-commerce participant	1%	0.1%

7. Introduction of TDS on payments made to Partners

• Union budget has proposed to introduce to Section 194T to Income Tax Act to provide for TDS on payment made to partners.
• As per Section 194T, where any firm is responsible for paying salary, remuneration, commission, bonus or interest to the partners then the firm shall, at the time of credit of such sum to the account of the partner (including the capital account) or at the time of payment thereof, deduct income-tax @ 10%.
• However, no TDS shall be deducted where such sum or the aggregate of such sums does not exceed INR 20,000 during the financial year.

8. Vivad se Vishwas Scheme, 2024 (VsV)

Post favourable outcome of Vivad se Vishwas Scheme, 2020, the Union budget has again provided for Vivad se vishwas scheme, 2024. 

8.1 Applicability of VsV

Benefit of VsV scheme is applicable for all Disputes and appeals, including writs and special leave petitions, whether filed by the taxpayer or the tax authorities which are pending as on 22nd July, 2024 before the following forums:

• The Supreme Court, High Court, Income Tax Appellate Tribunal, Commissioner/Joint Commissioner (Appeals)
• The Dispute Resolution Panel (DRP) or where DRP directions have been issued but the final assessment order is awaited
• Revision petitions pending before the Commissioner of Income Tax

8.2 Amount payable under VsV:

The taxpayers are required to make following payments to settle their disputes:

Nature of payment	Amount payable on or before 31st December, 2024	Amount payable on or after 1st January, 2025 but before the date notified by government
a. Dispute includes Tax, interest there and penalty:Appeal filed after 31st January, 2020 but upto 22nd July, 2024Appeal pending at the same forum on or before 31st January, 2020	100% of disputed tax amount 110% of disputed tax amount	110% of disputed tax amount 120% of disputed tax amount
b Dispute includes interest there and penalty:Appeal filed after 31st January, 2020 but upto 22nd July, 2024Appeal pending at the same forum on or before 31st January, 2020	25% of disputed amount 30% of disputed amount	30% of disputed amount 35% of disputed amount