Budget 2024 Highlights: Comprehensive Review and Sector-Wise Allocations

Introduction to the Budget

The Finance Minister announced the Final Budget on 23rd July 2024. This year’s budget aims to drive growth in key sectors such as employment, skilling, MSMEs, and the middle class. The FM emphasized that the 2024 budget prioritizes:

1. Productivity and Resilience in Agriculture
2. Employment and Skilling
3. Inclusive Human Resource Development and Social Justice
4. Manufacturing and Services
5. Urban Development
6. Energy Security
7. Infrastructure
8. Innovation, Research, and Development
9. Next Generation Reforms

Additionally, the budget introduced several significant reforms in both Direct and Indirect taxes.

Keep reading this article to learn about the major highlights of the Budget 2024.

Download Budget 2024 Documents

• Budget 2024
• Budget Speech

1. Direct Tax Proposals

Enhanced Limit of Standard Deduction and Family Pension Deduction Under New Regime

Under the new tax regime, the standard deduction for salaried individuals has been increased from Rs. 50,000 to Rs. 75,000. Similarly, the deduction on family pension for individuals with pension income has been increased from Rs. 15,000 to Rs. 25,000 if they file taxes under the new regime.

Changes in Tax Structure Under the New Regime

The new tax regime has revised the income tax structure as follows:

As a result of these changes, a salaried employee in the new tax regime can save up to Rs. 17,500 in taxes.

Simplification of Taxation of Capital Gains

To simplify the taxation of capital gains, the government has revised the holding periods for classifying assets into long-term and short-term categories:

• The 36-month holding period has been removed.
• The holding period for all listed securities is now 12 months. All listed securities held for more than 12 months are considered long-term.
• The holding period for all other assets is 24 months.
• Unlisted bonds and debentures are now aligned with the taxation of debt mutual funds and market-linked debentures and will attract tax on capital gains at applicable slab rates, treating them as short-term irrespective of the holding period.

Increased Exemption Limits for Long-Term Capital Gains

For the benefit of the lower and middle-income classes, the limit on the exemption of Long-Term Capital Gains on the transfer of equity shares, equity-oriented units, or units of Business Trust has been increased from Rs. 1 Lakh to Rs. 1.25 lakh per year. However, the tax rate on these gains has increased from 10% to 12.5%. The exemption limit applies for the whole year, while the new tax rate is effective from 23rd July 2024.

The tax on long-term capital gains for other financial and non-financial assets has been reduced from 20% to 12.5%, but the indexation benefit has been removed. Sales of long-term assets made from 23rd July 2024 will attract a tax rate of 12.5% without the indexation benefit. However, the provision for using the Fair Market Value (FMV) of the asset as of 01.04.2001 as the cost while selling the asset remains available.

Changes in TDS Rates

Budget 2024 has reduced the TDS rates on specified payments to facilitate business and improve taxpayer compliance. These changes will be effective from either 1st October 2024 or 1st April 2025. The specified payments and their revised TDS rates are as follows:

Introduction of TDS on Payments Made to Partners by Firms (Section 194T)

A new TDS provision has been introduced for payments made by firms (covering both partnership firms and LLPs) to partners by way of salary, remuneration, interest, bonus, or commission. Any payment by a firm of this nature exceeding Rs. 20,000 will now be subjected to TDS at the rate of 10% under Section 194T.

Abolishment of Angel Tax

The Angel tax provisions under Section 56(2)(viib) have been proposed for removal. Angel Tax is levied on companies issuing fresh shares to investors at a price above the company’s Fair Market Value. The excess of the issue price over the FMV was taxable as angel tax. The removal of this provision is expected to benefit the startup ecosystem by reducing compliance costs and time during fundraising activities.

Corporate Taxes on Foreign Companies

Corporate taxes imposed on foreign companies’ net income or profit have been reduced from 40% to 35%.

Increased Deduction on Employer’s Contribution to Pension Scheme

Section 80CCD, which provides a deduction for the employer’s contribution to the Pension scheme, has seen an increase in the deduction limit from 10% to 14% of the employee’s salary during the previous year.

STT on Futures and Options

The Securities Transaction Tax (STT) on futures has been increased from 0.0125% to 0.02%, and STT on options has been increased from 0.0625% to 0.1%.

Other Direct Tax Updates

• Reopening of ITR: An assessment can be reopened beyond three years if the escaped income is Rs 50 lakh or more, up to a maximum of five years from the end of the assessment year. For search cases, the time limit has been reduced from ten years to six years.
• Income Tax Appeals: The monetary limits for filing tax dispute appeals have been raised to Rs. 60 Lakh for tax tribunals, Rs. 1 Crore for high courts, and Rs. 2 Crore for the supreme court.
• Vivaad se Vishwas Scheme: This scheme has been reintroduced to facilitate the settlement of income tax disputes and eliminate litigation.

2. Indirect Tax Proposals

Customs Duties Reductions and Exemptions for Critical Goods

Budget 2024 has proposed several reductions and exemptions in customs duties for critical goods to support various industries:

Major GST Reforms and Amendments

• Un-denatured Extra Neutral Alcohol: Used in the manufacture of alcoholic liquor for human consumption, it will be kept out of the purview of GST.
• Section 74A: Introduced to determine tax not paid, short paid, erroneously refunded, or input tax credit wrongly availed or utilised from the financial year 2024-25 onwards.
• Tax Notices: Proper officers can now issue a notice within two years and nine months from the end of the financial year.
• GST Refunds: Changes have been made to rules related to refund and Input Tax Credit (ITC) claims.
• Blocked Credits: A new item has been added to the list of blocked credits under Section 17(5).
• Revised Provisions: Various sections have been amended for improved compliance and regulation.

Note: All direct and indirect tax amendments will come into force once notified by the CBDT or CBIC respectively.

Highlights for Various Sectors

Priority 1: Agriculture

• Provision of Rs. 1.52 lakh crore for agriculture and allied sectors.
• Release of 109 new high-yielding and climate-resilient crop varieties.
• Initiatives for natural farming and bio-input resource centres.
• Promotion of Farmer-Producer Organisations, startups, and cooperatives for vegetable supply chains.
• Strategy for self-sufficiency in oil seeds.
• Implementation of Digital Public Infrastructure in agriculture.
• Financial support for Nucleus Breeding Centres for Shrimp Broodstocks.

Priority 2: Employment and Education

• Three new ‘Employment Linked Incentive’ schemes based on EPFO enrolment.
• New centrally sponsored skilling scheme in collaboration with Industry and state governments.
• Revised Model Skill Loan Scheme.
• Financial support for higher education loans and e-vouchers for interest subvention.

Priority 3: Inclusive Human Resource Development and Social Justice

• Provision of Rs. 2.66 lakh crore for rural development and rural employment.
• Enhancement of health infrastructure with an allocation of Rs. 1.58 lakh crore.
• Launch of new schemes for women and child development.
• Increased allocations for Scheduled Castes, Scheduled Tribes, and Other Backward Classes.
• New initiatives for persons with disabilities.

Priority 4: Manufacturing and Services

• Allocation of Rs. 1.97 lakh crore under the Production Linked Incentive (PLI) scheme.
• Support for 13 sectors including automobiles, pharmaceuticals, textiles, and electronics.
• Financial incentives for setting up new manufacturing units.
• Emphasis on boosting exports and reducing import dependency.

Priority 5: Urban Development

• Allocation of Rs. 1.41 lakh crore for urban infrastructure.
• Launch of the Smart Cities Mission 2.0.
• Focus on affordable housing with an allocation of Rs. 1.25 lakh crore.
• New schemes for urban mobility and public transportation.
• Support for the development of satellite towns.

Priority 6: Energy Security

• Allocation of Rs. 1.65 lakh crore for the energy sector.
• Emphasis on renewable energy with a target of achieving 450 GW by 2030.
• Support for the development of green hydrogen projects.
• Incentives for the adoption of electric vehicles.
• Promotion of energy efficiency and conservation measures.

Priority 7: Infrastructure

• Allocation of Rs. 1.81 lakh crore for infrastructure development.
• Launch of the National Infrastructure Pipeline (NIP) 2.0.
• Focus on the development of roads, railways, and airports.
• Support for the development of logistics parks and multimodal transport hubs.
• Financial support for the development of smart infrastructure.

Priority 8: Innovation, Research, and Development

• Allocation of Rs. 1.32 lakh crore for research and development.
• Support for innovation and technology startups.
• Financial incentives for research in emerging technologies like AI, blockchain, and quantum computing.
• Emphasis on the development of research infrastructure in universities and research institutions.
• Promotion of collaboration between academia, industry, and government.

Priority 9: Next Generation Reforms

• Emphasis on governance reforms to improve ease of doing business.
• Introduction of new policies to promote digital governance.
• Reforms to streamline regulatory processes and reduce compliance burden.
• Launch of new initiatives to promote transparency and accountability in government operations.
• Support for the development of digital infrastructure and digital literacy programs.

Conclusion

The Budget 2024 aims to drive growth across various sectors by introducing significant reforms and increasing allocations. With a focus on employment, skilling, agriculture, manufacturing, services, urban development, energy security, infrastructure, and innovation, the budget sets the stage for sustainable economic growth and development. The changes in direct and indirect tax proposals are expected to simplify tax compliance and provide relief to taxpayers, while the increased allocations for key sectors are likely to boost economic activity and create new opportunities for businesses and individuals alike.