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.
Read Also: Income Tax on Dividends Income
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 |
