Union Minister of Finance and Corporate Affairs, Ms. Nirmala Sitharaman, presented the first financial budget of the re-elected Prime Minister, Mr. Narendra Modi's government for its third consecutive term before the Parliament of India. This budget continues the government’s focus on simplifying taxes, reducing litigation, and enhancing taxpayer services to boost tax compliance and business growth. The budget's measures reflect the administration's commitment to creating a conducive environment for both domestic and international investors while aiming to streamline tax processes.

Tax Simplification and Compliance

A key highlight of the budget is the comprehensive review of the Income Tax Act 1961, aimed at making it more concise and straightforward. This review includes merging two exemption regimes for charities to simplify compliance and administration. Additionally, the budget proposes reducing the tax deducted at source (TDS) rate from 5% to 2% on various payments such as commission/brokerage and rent, which is expected to ease the burden on taxpayers and improve business prospects.

Also Read : Union Budget 2024-25: Fiscal Deficit Target Revised to 4.9%, Focus on Sustainable Growth

Litigation Reduction

To address the issue of litigation, the budget introduces an amnesty scheme for dispute resolution, providing a one-time opportunity for taxpayers to settle their disputes. The budget also proposes increasing the monetary limits for appeals to reduce the number of cases reaching higher courts. Furthermore, the deployment of additional officers to handle appeal pendency aims to expedite the resolution process, reducing the backlog and enhancing the efficiency of the tax system.

Investment Incentives

Significant steps have been taken to enhance India’s attractiveness for both domestic and international investors. The abolition of the Angel tax and the equalization levy of 2% on e-commerce services provided by non-residents are major highlights. These measures are expected to encourage startups and e-commerce businesses by removing barriers that previously hindered their growth.

Additionally, the corporate tax rate for foreign companies has been reduced from 40% to 35%, making India a more competitive destination for international investments. These tax reforms are designed to boost foreign direct investment (FDI) and enhance the overall business environment in the country.

Capital Gains Tax Reforms

The budget introduces significant changes to the capital gains tax provisions. These changes include reducing the holding periods to 12 months for listed securities and 24 months for other assets. The short-term capital gains tax has been increased to 20%, while the long-term capital gains tax has been set at 12.5%. These reforms aim to rationalize the capital gains tax structure, making it more straightforward and aligned with international standards.

Personal Taxation

On the personal taxation front, the budget proposes a new tax regime that may provide savings of up to US$ 209.18 (Rs. 17,500). Additionally, increases in the standard deduction and family pension deduction are proposed to provide relief to individual taxpayers. However, anticipated relief for salaried individuals remains limited, and the full impact of these changes will become clearer in the coming months as more details emerge.

Conclusion

The Union Budget 2024-25 presented by Ms. Nirmala Sitharaman marks a significant step towards simplifying the tax system, reducing litigation, and enhancing the attractiveness of India as an investment destination. The budget's focus on tax reforms, business growth measures, and investment incentives reflects the government's commitment to fostering a business-friendly environment while maintaining fiscal prudence.

While the budget advances tax simplification and investment attractiveness, its impact on salaried individuals will become clearer as the details are fully analyzed. Overall, the Union Budget 2024-25 sets a robust foundation for sustainable economic growth and development, aligning with Prime Minister Mr. Narendra Modi’s vision for a prosperous and resilient India.

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