KEY HIGHLIGHTS RELATED TO TAXATION FOR INTERIM BUDGET 2024

On February 1st of each year, the Indian Finance Minister releases the yearly budget. As is customary, the budget for the year 2024–2025 was unveiled on February 1st, 2024, by Smt. Nirmala Sitharaman, the current Finance Minister. Budget 2024 was replaced with an interim budget, nonetheless, because of the impending Central elections. Put otherwise, the budget for 2024–2025 is not finalized here. When the Central elections are over, the newly elected government will unveil the final budget.

The FM announced on 1st February 2024 that the theme for this year’s Budget would be “Viksit Bharat Budget 2024”. She reiterated that the country continues to strive towards "Atmanirbhar Bharat". At the same time, the welfare and aspirations of the Gareeb (poor), Mahila (women), Yuva (youth), and Annadata (farmers) would be the most important focus areas in the Interim Budget 2024.

Here are the key highlights (Taxation) from the Interim Budget 2024.

1. The Finance Minister Nirmala Sitharaman has not announced any change in the income tax slabs and income tax rates in her interim budget speech. This would mean that individuals will calculate the income tax payable on their incomes same as they are doing it for current financial year 2023-24.

Income tax slabs under new tax regime

As per the interim Budget 2024, No changes in the income tax slabs for the upcoming financial year, 2024-25 have been made. The income tax slabs for FY 2024-25 (AY 2025-26) is same as FY 2023-24 in the new tax regime are as follows:

Note : Cess will be levied at 4% on income tax amount. Surcharges will be levied on incomes above Rs 50 lakh. 

What the salaried get in the new tax regime 

The Budget 2023 had made some changes in the new tax regime for salaried individuals. If a salaried individual opts for the new tax regime in FY 2023-24 and/or FY 2024-25, they should be aware of the following tax benefits:

• • • Income tax slabs revised from six to five.
    • Basic exemption limit hiked to Rs 3 lakh from Rs 2.5 lakh.
    • Zero tax payable for incomes not exceeding Rs 7 lakh due to rebate being hiked under Section 87A.
    • Standard deduction introduced for salaried, pensioners and family pensioners.
    • New tax regime becomes default tax regime.
    • Surcharge on incomes above Rs 5 crore reduced to 25% from 37%.
    • Marginal tax relief for small taxpayers whose incomes exceed Rs 7 lakh.

Income tax slabs under the old tax regime

In the old tax regime, the basic exemption limit for individuals below 60 years is Rs 2.5 lakh. For senior citizens (above 60 years but below 80 years) and super senior citizens (80 years of age and above), the basic tax exemption limit is Rs 3 lakh and Rs 5 lakh, respectively.

Here are the income tax slabs for FY 2023-24 (AY 2024-25) in the old tax regime for individuals below 60 years of age, senior citizens and super senior citizens. The below mentioned income tax slabs under old tax regime will be applicable for FY 2024-25 (AY 2025-26) as well.

Current income tax slabs for Individuals below 60 years

Current income tax slabs for Senior Citizens

Current income tax slabs for Super Senior Citizens

Note: Cess will be levied at 4% on the income tax amount. Surcharges will be levied on incomes above Rs 50 lakh.

What the salaried get in the old tax regime

Unlike the new tax regime, an individual can avail of various tax exemptions and deductions under the old tax regime. These are Section 80C, 80D, Section 80TTA, HRA tax exemption and LTA tax exemption, among others.

Note: Tax rebate under Section 87A is available under the old tax regime for taxable income up to Rs 5 lakh.

Standard Deduction and Section 80C Limits Remain Unchanged

• • • The existing standard deduction of ₹50,000 for salaried individuals and pensioners stays put. This deduction helps to reduce taxable income without requiring specific documentation.
    • Similarly, the maximum investment limit of ₹1.5 lakh under Section 80C for claiming tax deductions on various investments and expenses remains unchanged. This section includes popular tax-saving avenues like PPF, ELSS mutual funds, and health insurance premiums.

2. Big relief to the taxpayers who have small, disputed tax demand

The Government has proposed to waive off the outstanding direct tax demand of upto Rs. 25,000 for disputes till Financial Year 2009-10. Further, the outstanding direct tax demand of upto Rs. 10,000 is proposed to be waived off from FY 2010-11 to 2014-15. The withdrawal of outstanding income tax demand would come as a big relief to the taxpayers who have small, disputed tax demands pending since long. This is expected to benefit about a crore tax-payers.

3. The 22% tax rate for corporate taxes will apply for existing domestic companies and 15% for certain new manufacturing companies.

4. The FM announced that direct tax collections have more than tripled over the last ten years, with the number of return filers at 2.4 times.

5. On the other hand, the average processing time of tax returns has reduced from 93 days in 2013-14 to 10 days in 2023-24.

6. The FM has proposed an extension in the time limit for certain tax benefits for start-ups and investments made by sovereign wealth funds/pension funds, and a tax exemption for specific IFSC units that expires on 31st March 2024. The same has been extended up to 31st March 2025.

7. Indirect Taxes

• • FM proposes to retain same tax rates for indirect taxes and import duties.
  • GST unified the highly fragmented indirect tax regime in India.
    • Average monthly gross GST collection doubled to Rs 1.66 lakh crore this year.
    • GST tax base has doubled.
    • State SGST revenue buoyancy (including compensation released to states) increased to 1.22 in post-GST period (2017-18 to 2022-23) from 0.72 in the pre-GST period (2012-13 to 2015-16).
    • 94% of industry leaders view transition to GST as largely positive.
    • GST led to supply chain optimization.
    • GST reduced the compliance burden on trade and industry.
    • Lower logistics cost and taxes helped reduce prices of goods and services, benefiting the consumers.

8. Tax rationalization efforts over the years

• • No tax liability for income upto Rs 7 lakh, up from Rs 2.2 lakh in FY 2013-14.
  • Presumptive taxation threshold for retail businesses increased to Rs 3 crore from Rs 2 crore.
  • Presumptive taxation threshold for professionals increased to Rs 75 lakh from Rs 50 lakh.
  • Corporate income tax decreased to 22% from 30% for existing domestic companies.
  • Corporate income tax rate at 15% for new manufacturing companies.

9. Achievements in tax-payer services

• • Average processing time of tax returns has reduced to 10 days from 93 days in 2013-14.
  • Faceless Assessment and Appeal introduced for greater efficiency.
  • Updated income tax returns, new form 26AS and prefilled tax returns for simplified return filing.
  • Reforms in customs leading to reduced Import release time.
    • Reduction by 47% to 71 hours at Inland Container Depots.
    • Reduction by 28% to 44 hours at Air Cargo complexes.
    • Reduction by 27% to 85 hours at Sea Ports.