Union Budget 2024:  On July 23, 2024, Finance Minister Nirmala Sitharaman made history by presenting her seventh consecutive Union Budget in Parliament. The finance minister announced a host of significant proposals aimed at boosting domestic manufacturing, simplifying tax structures, and enhancing competitiveness across various sectors.

"We will continue our efforts to simplify taxes, improve tax payer services, provide tax certainty and reduce litigation while enhancing revenues for funding the development and welfare schemes of the government. 136. It has been our endeavour to simplify taxation," she said while explaining her direct tax proposals. Read full text of Budget speech

Here are some of the key takeaways from her speech address, focusing on indirect and direct taxes:

Indirect Taxes: GST, customs duties, & more

Goods and Services Tax (GST)

Finance Minister Sitharaman highlighted the success of GST in reducing the tax burden on the common man, lowering compliance costs for businesses, and increasing revenues for both central and state governments. To further these benefits, the government plans to simplify and rationalise the GST structure and expand its coverage to remaining sectors.

Customs Duties

A comprehensive review of the customs duty rate structure is planned over the next six months to ease trade, eliminate duty inversion, and reduce disputes.

Medicines and medical equipment: To provide relief to cancer patients, three additional medicines will be exempt from customs duties. Changes in the Basic Customs Duty (BCD) on x-ray tubes and flat panel detectors will align with domestic capacity additions.

Mobile phones and related parts: With significant growth in the mobile phone industry, the BCD on mobile phones, mobile PCBA, and mobile chargers will be reduced to 15 per cent.

Critical minerals: Customs duties on 25 critical minerals, including lithium, copper, and cobalt, will be fully exempted, and BCD on two of them will be reduced to support sectors like nuclear energy, renewable energy, and telecommunications.

Solar energy: The list of exempted capital goods for manufacturing solar cells and panels will be expanded. However, the exemption on solar glass and tinned copper interconnect will not be extended due to sufficient domestic manufacturing capacity.

Marine products: To enhance the competitiveness of seafood exports, particularly frozen shrimp, the BCD on certain brood stock, polychaete worms, shrimp, and fish feed will be reduced to 5 per cent. Various inputs for manufacturing shrimp and fish feed will be exempted from customs duties.

Leather and textile: The BCD on real down filling material from duck or goose will be reduced to enhance the competitiveness of exports in the leather and textile sectors. Additions will be made to the list of exempted goods for manufacturing leather and textile garments, footwear, and other leather articles for export.

Precious metals: To boost domestic value addition in gold and precious metal jewelry, customs duties on gold and silver will be reduced to 6 per cent, and on platinum to 6.4 per cent.
Other metals: BCD on ferro nickel and blister copper will be removed to reduce production costs in the steel and copper industries. The nil BCD on ferrous scrap and nickel cathode and the concessional BCD of 2.5 per cent on copper scrap will continue.

Electronics: To increase value addition in the domestic electronics industry, BCD on oxygen-free copper for manufacturing resistors and certain parts for manufacturing connectors will be removed.

Chemicals and petrochemicals: The BCD on ammonium nitrate will be increased from 7.5 per cent to 10 per cent to support existing and new capacities in the pipeline.

Plastics: The BCD on PVC flex banners, which are hazardous to the environment and health, will be raised from 10 per cent to 25 per cent to curb imports.

Telecommunication equipment: The BCD on PCBA of specified telecom equipment will be increased from 10 per cent to 15 per cent to incentivize domestic manufacturing.

Trade facilitation: The period for exporting goods imported for repairs will be extended from six months to one year. Similarly, the time limit for re-importing goods for repairs under warranty will be extended from three to five years.

Direct Taxes: Income-tax review, news slabs, capital gains, & more

The government's ongoing efforts to simplify taxes, improve taxpayer services, provide tax certainty, and reduce litigation continue with several key proposals.

Comprehensive review of the Income-tax Act, 1961

A comprehensive review of the Income-tax Act, 1961, aims to make it concise, lucid, and easy to understand, thereby reducing disputes and providing tax certainty to taxpayers. This review is expected to be completed within six months.

Simplification for charities and TDS

The two tax exemption regimes for charities will be merged into one. The 5 per cent TDS rate on many payments will be merged into the 2 per cent TDS rate, and the 20 per cent TDS rate on the repurchase of units by mutual funds or UTI will be withdrawn. TDS rate on e-commerce operators will be reduced from 1 per cent to 0.1 per cent. Additionally, the government plans to decriminalize delays in TDS payments up to the due date of filing statements and provide a standard operating procedure for TDS defaults.

Simplification of reassessment

The provisions for reopening and reassessment will be simplified. Assessments can be reopened beyond three years only if the escaped income is Rs 50 lakh or more, up to a maximum period of five years. In search cases, the time limit will be reduced from ten years to six years before the year of search.

Simplification and rationalization of capital gains

Short-term gains on certain financial assets will attract a tax rate of 20 per cent, while long-term gains on all financial and non-financial assets will be taxed at 12.5 per cent. The exemption limit for capital gains on certain financial assets will be increased to Rs 1.25 lakh per year.

Taxpayer services and litigation

All major taxpayer services under GST and most services under Customs and Income Tax will be digitized and made paperless over the next two years. The government plans to deploy more officers to address the backlog of first appeals and introduce the Vivad Se Vishwas Scheme, 2024, for resolving certain income tax disputes pending in appeal. The monetary limits for filing appeals related to direct taxes, excise, and service tax will be increased.

Employment and investment

To bolster the Indian start-up ecosystem, the so-called angel tax for all classes of investors will be abolished. A simpler tax regime for foreign shipping companies operating domestic cruises, safe harbor rates for foreign mining companies selling raw diamonds in India, and a reduced corporate tax rate on foreign companies from 40 per cent to 35 per cent are also proposed.

Deepening the tax base

The Security Transactions Tax on futures and options of securities will be increased to 0.02 per cent and 0.1 per cent, respectively. Income received on buyback of shares will be taxed in the hands of the recipient.

Personal income tax

For those opting for the new tax regime, the standard deduction for salaried employees will be increased from Rs 50,000 to Rs 75,000. The deduction on family pension for pensioners will be enhanced from Rs 15,000 to Rs 25,000. The revised tax rate structure will result in savings of up to Rs 17,500 for salaried employees.

How does it impact the revenue

The proposals will result in a revenue forgone of about Rs 37,000 crore, with Rs 29,000 crore from direct taxes and Rs 8,000 crore from indirect taxes. However, approximately Rs 30,000 crore will be mobilized, leading to a total revenue forgone of around Rs 7,000 crore annually.