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A key expectation is an increase in the basic exemption limit, which currently stands at Rs 3 lakh in the new tax regime Income Tax LIVE News: Despite high hopes, significant tax relief for the middle class may not materialize in the upcoming budget.
"The government will present the full-fledged budget for FY 2024-25 on July 23, and there are already positive expectations surrounding the measures to be announced. However, this government's track record shows that major policy announcements typically occur outside the budget," said Himanshu Kohli, Co-founder of Client Associates.
With Prime Minister Narendra Modi's government facing a weaker mandate and benefiting from a substantial Rs 2.1 lakh crore dividend from the Reserve Bank of India (RBI) for FY24, there is an expectation of populist measures.
This dividend is likely to aid in maintaining fiscal consolidation, even as budgetary prudence remains a priority, aiming to reduce the fiscal deficit to 5% from 5.1%.
While hopes are high for tax relief, Kohli suggests that the government will focus on prudent fiscal management and fostering economic growth.
Regarding the changes in the capital gain structure in Budget 2024, Shlok Srivastav, Cofounder & COO of Appreciate, says, "Markets and the business ecosystem expected some rationalization of long-term and short-term capital gains tax rates. The significant increase in STCG from 15% to 20% is sensible, given concerns about the derivatives market overheating. The market regulator's recent statement that the growth in trading volume has become a macro-level concern was a strong indication that the government aimed to moderate activity in the derivatives segment. Nonetheless, the government should be commended for addressing multiple issues with the revision in LTCG. For serious long-term investors, the increase from 10% to 12.5% will have a minimal impact on overall gains. Additionally, it will encourage investors to adopt a long-term perspective and become genuine stakeholders in India's growth. While the LTCG increase may dampen market sentiment temporarily, history shows that capital market players will adapt and move forward."
Currently, under the existing rules, an employee benefits form the employer's contribution to the National Pension System (NPS), which is capped at 10% of the salary (Basic + Dearness Allowance) and is deductible from taxable income up to a limit of 7.5 lakh. Raising the deductible amount from 10% to 14% would allow taxpayers to have a higher take-home pay by reducing their income tax liability.
In January, Deepak Mohanty, the chairman of the Pension Fund Regulatory and Development Authority (PFRDA), suggested that employers' contributions to the NPS, up to 12% of an employee's basic salary, should be tax-exempt. He stated, "We have advocated for equalizing the tax benefits of employers' contributions to the NPS with the 12% limit on employees' provident fund (EPF) contributions."
Suresh Surana, a Chartered Accountant, explains that while there are some simplifications for capital gains, the tax rate for short-term gains on certain financial assets has increased from 15% to 20%. The tax rate for short-term gains on other financial assets remains unchanged. Long-term gains on both financial and non-financial assets will be taxed at 12.5%. Listed financial assets will be considered long-term if held for over a year, whereas unlisted financial assets must be held for at least two years to qualify as long-term. However, unlisted bonds, debentures, debt mutual funds, and market-linked debentures will be taxed at applicable rates for capital gains regardless of the holding period.
New Income tax slabs declared
Upto Rs 30,000 to Nil
From 3,00,001 to 7,00,000
From 7,00,001 to 10,00,000
From 10,00,001 to 12,00,000
From 12,00,001 to 15,00,000
Above 15,00,000
The standard deduction increased from Rs 50,000 to Rs 75,000 in the new tax regime.
Finance Minister announces a thorough review of the Income Tax Act, 1961
Government to prioritize the following things in the FY2024-25
1. Productivity and Resilience in Agri
2. Skilling
3. Inclusive Development
4. Manufacturing and Services
5. Urban Development
6. Energy Security
7. Infrastructure
Rules for FDI and Overseas investment to be simplified, FM declares
Finance Minister Nirmala Sitharaman announces venture capital fund of Rs 1000 crore for Space economy for FY 2024-25.
Union Budget 2024-25 gives particular attention to MSMEs and manufacturing, especially labour-intensive manufacturing.
1. New mechanism declared to facilitate continuation of bank credit to MSMEs during their stress period.
2. Limit of Mudra Loans increased from Rs 10 lakh to Rs 20 lakh
Finance Minister Nirmala Sitharaman shares a plan to encourage women's participation in the workforce through the setting up of working women hostels in collaboration with industry and establishing creches, additionally, the partnership seeks to organise specific skilling programs and promotion of market taxes for women's SHG enterprises.
Finance Minister Nirmala Sitharaman begins the Union Budget for Financial Year 2024-25
Union Cabinet led by Prime Minister Narendra Modi in Parliament to approve the Union Budget ahead of Finance Minister Nirmala Sitharaman's presentation of the Budget.
Sarbvir Singh, Joint Group CEO, PB Fintech shares his core expectations from Budget 2024
1. The insurance industry is anticipating major reforms in the Union Budget 2024 that could drive sector growth and bolster the economy. The industry is hoping for changes to the Insurance Act that would allow new entrants, including foreign insurers and insurtech companies, to foster product innovation and expand insurance coverage in India.
2. The sector is also hopeful that the government will introduce health schemes to support the rapidly growing aging population. By 2047, this group is expected to outnumber those ages 0-14, making up 30% of India's population, with 60% lacking sufficient income to cover healthcare costs. Developing inclusive health schemes will be vital for securing their health and financial stability. Additionally, there is an expectation that pension products like annuity, plans should receive the same tax benefits as the National Pension System (NPS) because the current tax policies do not encourage investment in retirement planning.
3. It is also important to increase the long-standing deduction limits for protection products, such as health and term insurance products from 18% to 5%, which would benefit consumers economically and help increase insurance penetration. Moreover, there is a recommendation for tax exemptions on Health Savings Accounts (HSAs).
4. The industry is also seeking GST relief on health insurance for MSMEs. Current GST regulations place a significant burden on these businesses since they cannot claim input credit for the GST paid on employee health insurance premiums. These expectations and recommendations align with the industry's goal of achieving "Insurance for All" by 2047, which would significantly contribute to sector growth and ensure the well-being of all policyholders.
According to Vivek Jalan, Partner at Tax Connect Advisory Services LLP, a nationwide consulting firm, "The provisions for TDS/TCS might be relaxed and simplified overall. TDS/TCS is essentially an advance tax paid to the government, but the complexity of over 40 sections make compliance challenging for both those deducting and those being deducted. For instance, the rule should be eliminated were, if TDS on goods at 0.1% under section 194Q is not deducted by the buyer, the seller must pay TCS under Section 206C(1H) at 0.1%. The results in unnecessary interest and penalties on the seller, who only becomes aware of the buyer's default after 6-12 months."
At present, STCG on equities are taxed at 15 per cent while long-term capital gains over Rs 1 lakh are taxed at 10 per cent. The government levies a 0.1 per cent STT on each equity sale or purchase transactions on stock exchanges.
When Finance Minister Nirmala Sitharaman presents the Union budget today, one thing investors, taxpayers, corporates, and mutual fund houses will be keen to know will be changes in the capital gains tax structure.
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