TAXATION HIGHLIGHTS OF UNION BUDGET 2024-2025

1. CHANGES IN SLAB RATES UNDER NEW TAX REGIME

2. STANDARD DEDUCTION

• Standard Deduction Increased from 50,000 to 75,000 under the New Tax Regime.

3. ANGEL TAX ABOLISHED

• Angel Tax removed w.e.f. 1st April 2025

4. CORPORATE TAX

• Corporate Tax for Foreign Companies reduced to 35% from 40%.

5. REDUCTION IN HOLDING PERIOD FOR NON-FINANCIAL ASSETS [SEC 2 (42A)]

• A significant amendment has been made under Section 2 (42A) regarding the holding period for non-financial assets. The holding period required to qualify for long-term capital gains treatment has been reduced from 36 months to 24 months. This change aims to provide greater flexibility and potentially lower tax liabilities for individuals and businesses by enabling quicker asset liquidation and reinvestment.

6. TAXATION ON BUYBACK OF SHARES

• As per the latest amendments under Sections 2(22) and 46A, buyback of shares will now be taxed in the hands of investors. This change signifies a shift in the tax burden from the company to the individual shareholder, impacting investors’ after-tax returns on such transactions.

7. INTRODUCTION OF SECTION 44BBC FOR NON-RESIDENT INDIANS (NRIS) INVOLVING CRUISE SHIP PROFITS

• In a significant move to streamline tax provisions for Non-Resident Indians (NRIs), the latest budget introduces Section 44BBC. This new section specifically addresses the taxation of profits earned by NRIs from operations involving cruise ships.

8. KEY PROVISIONS OF SECTION 44BBC:

• Applicability: The section applies exclusively to Non-Resident Indians (NRIs) involved in cruise ship operations.
• Profit Disclosure: Under this section, NRIs can disclose their profits from cruise ship operations at a fixed rate of 20%.
• Simplification of Taxation: The introduction of this section aims to simplify the taxation process for NRIs, providing clarity and easing compliance burdens associated with their maritime ventures.

MARCKS POV: –

“By implementing Section 44BBC, the government seeks to encourage greater participation of NRIs in the cruise ship industry while ensuring a straightforward and efficient tax regime. This move is anticipated to bolster the maritime sector and provide a transparent mechanism for NRIs to manage their tax obligations.”

9. SECTION 40(B) REMUNERATION OF PARTNERS

 10. SECTION 36 (1) (iva)

• The recent budget has introduced significant amendments to the employer contributions under the National Pension System (NPS). Specifically, there have been updates to Section 36(1)(iva) and Section 80CCD of the Income Tax Act.

1. Key Change:

• The employer’s contribution to NPS has increased from the previous 10% to 14%.

1. Sections Affected:

1. Section 36(1)(iva): This section pertains to the allowable deductions for employers regarding their contributions to the NPS for the benefit of employees. The increased contribution rate aims to enhance the retirement benefits of employees.
2. Section 80CCD: This section relates to the deductions available to employees on contributions made to the NPS. With the increased employer contribution, employees will receive greater benefits under this section.

11. NO INDEXATION ALLOWED ON PROPERTY SALES POST JULY 23, 2024 (SEC 48)

• In a significant change under Section 48, the indexation benefit will no longer be available for the sale of properties on or after July 23, 2024. This amendment aims to streamline the taxation process on capital gains derived from property transactions. Indexation, which previously adjusted the purchase price of assets to account for inflation, will now be excluded from the calculation of capital gains. This change could have notable implications for property investors and sellers, as it may result in higher tax liabilities on the gains from property sales.
• Further to note:- The abolition of indexation benefits in calculating capital gains on real estate and property will not affect everyone. Old properties held before 2001 would continue to get indexation benefits. Legacy assets and old properties will benefit.

12. OVERHAUL OF CAPITAL GAINS TAXES (W.E.F. 23.07.2024)

• Short Term Capital Gains increased from 15 % to be taxed at 20% on all financial assets (Sec 111A )
• Short Term Capital Gain on all other assets it remains as it was
• Long Term Capital Gains increased from 10 % to be taxed at 12.5% on all assets – WITHOUT INDEXATION BENEFIT! (Sec 112 & Sec 112 A)
• Exemption on LTCG u/s 112A to be increased to Rs. 1,25,000 from existing 1,00,000 Rupees.

13. SECURITY TRANSACTION TAX (STT) ADJUSTMENTS

• In the recent budget announcement, significant changes have been introduced to the Security Transaction Tax (STT) structure. These adjustments are as follows:

1. Future Transactions: The STT for futures contracts has been increased from 0.0125% to 0.02%. This adjustment reflects a strategic move to align tax rates with current market conditions and fiscal objectives.
2. Options Transactions: The STT applicable to options contracts has been revised from 0.625% to 0.1%. This reduction aims to enhance liquidity and encourage participation in the options market.

14. VIVAD SE VISHWAS SCHEME

• Vivad se Vishwas Scheme 2024 for pending Income Tax Litigations introduced.

15. TDS CHANGES

The following are key highlights of the changes in Tax Deducted at Source (TDS) rates and sections as per the latest budget:

1. Reduction in TDS Rates: Several TDS rates have been reduced to ease the compliance burden on taxpayers and encourage transparency. The sections affected include 194DA, 194G, 194H, 194IB, 194M, and 194O, with reductions from 5% to 2% and 1% to 0.1%.
2. Omission of Section 194F: Section 194F, which dealt with TDS on payments under the National Savings Scheme, has been omitted, simplifying the tax structure.

Comparison of TDS Rates in Tabular Format

INDIRECT TAXATION (GST)

1. Time Limit for Issuing Notices [Sec 74 (2)]:

1. • A new Section 74A(2) has been introduced in the CGST Act. Under this section, the time limit for sending a notice is now set at 42 months from the date of filing the annual returns or the refund order.

2. Order Issuance Timeline [Sec 74( 7)]:

1. • Orders related to the notices must be passed within 12 months from the date of the notice period maybe extended for a maximum of 6 months by the commissioner or any officer authorized by the commissioner.

3. Penalties for Non-compliance [Sec 74 (5)]

1. • In cases of fraud, wilful misstatement, or suppression of facts:
     • The penalty imposed will be 100% of the tax amount.
   • In cases other than fraud:
     • The penalty will be the higher of 10% of the tax amount or Rs. 10,000/-

4. Section 74(8) – Penalty Relief for Non-Fraud Cases

• In cases where the tax liabilities arise due to reasons other than fraud, wilful misstatement, or suppression of facts, there is an opportunity for penalty relief. If the tax and interest are paid before or within 60 days of receiving a show cause notice, no penalty will be imposed.

5. Section 74(9) – Penalty Provisions for Fraudulent Activities

• Fraud, Wilful Misstatement, or Suppression of Facts: If the tax and interest are paid before the issuance of a show cause notice, a penalty of 15% of the tax amount will be levied
• Payment Within 60 Days of Show Cause Notice: If the tax and interest are paid within 60 days of the show cause notice, the penalty increases to 25% of the tax amount.
• Payment Within 60 Days of Communication of Order: Should the payment be made within 60 days of the communication of the final order, the penalty will be set at 50% of the tax amount.

6. Section 112(8)-  Pre-Deposit Amount for Tribunal Appeals: Under Section 112(8), the pre-deposit requirement for appeals to the tribunal has been reduced from 20% to 10% of the disputed amount. This reduction is subject to a maximum cap of ₹20 crore, revised from the previous limit of ₹50 crore.
7. Section 73 Waiver of Interest and Penalty: There is a provision for the waiver of interest, penalty, or both, concerning demands raised for the period from 1st July 2017 to 31st March 2020. This waiver is applicable provided that the tax is paid on or before a date specified by the Government, as per recommendations from the Council.

COMPARISON CHART FOR TAXATION OF LISTED AND UNLISTED ASSETS

DISCLAIMER: This document can be treated as reference for brief highlights of the Union Budget 2024 as presented by our understanding from excerpts and details available in public platform. There may be further details in the fine print of the Finance Bill and therefore we would request a perusal of the same before forming an opinion. M A R C K S Network and/or Network Firms shall not be liable for any actions taken by the Reader on based of this document.