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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: Productivity and Resilience in Agriculture Employment and Skilling Inclusive Human Resource Development and Social Justice Manufacturing and Services Urban Development Energy Security Infrastructure Innovation, Research, and Development 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 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: Income Tax Slabs Tax Rate ₹0-3 lakh Nil ₹3-7 lakh 5% ₹7-10 lakh 10% ₹10-12 lakh 15% ₹12-15 lakh 20% Above ₹15 lakh 30% 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: TDS Sections Current TDS Rate Proposed TDS Rate Effective from Section 194D – Payment of insurance commission (other than company) 5% 2% 1st April 2025 Section 194DA – Payment in respect of life insurance policy 5% 2% 1st Oct 2024 Section 194G – Commission on sale of lottery tickets 5% 2% 1st Oct 2024 Section 194H – Payment of commission or brokerage 5% 2% 1st Oct 2024 Section 194-IB – Payment of Rent by certain individuals or HUF 5% 2% 1st Oct 2024 Section 194M – Payment of certain sums by certain individuals or HUFs 5% 2% 1st Oct 2024 Section 194-O – Payment by e-commerce operator to e-commerce participants 1% 0.1% 1st Oct 2024 Section 194F – Payment on account of repurchase of units by mutual funds or UTI Omitted – 1st Oct 2024 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