India Budget 2024 – Highlights
On July 23, 2024, the Finance Minister of India, Ms. Nirmala Sitharaman presented before the Parliament, the first full-fledged Union Budget after the 2024 Lok Sabha elections in India. Earlier, an interim budget was presented on Feb 1, 2024, by the Government prior to elections. The Finance Bill was approved by both the houses of Parliament with certain amendments. The Bill has received the Presidential assent after which it has been published in the Official Gazette as the Finance Act 2024.
The tax proposals listed below are applicable for Financial Year (FY) 2024-25 corresponding to Assessment Year (AY) 2025-26, unless specified otherwise.
Direct Tax (Income Tax)
Tax Rates
Individuals:
- Indian Income-tax Act (the Act) provides two tax regimes for taxation of individuals – one provides for concessional slabs / rates without allowing certain exemptions /deductions (tax regime without deductions) which is a default tax regime and the other has higher tax rates, but it allows number of deductions (tax regime with deductions). The taxpayer has the option to choose the tax regime with deductions’ by filing an applicable form with the income tax department.
The Budget has made changes in the income slabs applicable to the default tax regime (i.e., regime without deductions) as under:
| FY 2024-25 | FY 2023-24 | ||
| Annual Taxable Income (In INR) | Income Tax Rate | Annual Taxable Income (In INR) | Income Tax Rate |
| Up to 300,000 | Nil | Up to 300,000 | Nil |
| 300,001 to 700,000 | 5% | 300,001 to 600,000 | 5% |
| 700,001 to 1,000,000 | 10% | 600,001 to 900,000 | 10% |
| 1,000,001 to 1,200,000 | 15% | 900,001 to 1,200,000 | 15% |
| 1,200,001 to 1,500,000 | 20% | 1,200,001 to 1,500,000 | 20% |
| Above 1,500,000 | 30% | Above 1,500,000 | 30% |
However, in case of tax regime with deductions, tax rates and income slabs continue to remain unchanged since FY 2022-23 which are as follows:
For individuals below the age of 60 years:
| FY 2024-25 and FY 2023-24 | |
| Annual Taxable Income (In INR) | Income Tax Rate |
| Up to 250,000 | Nil |
| 250,001 to 500,000 | 5% |
| 500,001 to 1,000,000 | 20% |
| Above 1,000,000 | 30% |
- Further the Act provides a tax rebate whereby the taxpayer is not required to pay tax if his taxable income is below INR 500,000 (for tax regime with deductions) or INR 700,000 (for tax regime without deduction). This provision remains unchanged from the earlier year.
- The surcharge rates remain unchanged. The tax computed as above is to be further increased by surcharge at rates mentioned below and a health and education cess @ 4%:
- Income (all kinds of income) exceeding INR 5 million but not exceeding INR 10 million – 10%
- Income (all kinds of income) exceeding INR 10 million but not exceeding INR 20 million – 15%
- Income (excluding income from dividend and specified capital gains) exceeding INR 20 million but not exceeding INR 50 million – 25%
- Income (excluding income from dividends and specified capital gains) exceeding INR 50 million – 37%. Where the taxpayer is under the tax regime without deductions, the surcharge applicable will be restricted to 25%.
- In case of the last two situations mentioned above, surcharge at 15% is applicable on income from specified capital gains and dividend.
Illustrations of tax liability calculated at different income levels and under different options are given in Annexure A.
Companies:
- There is no change in corporate income tax rates (CIT) for Indian Companies. However, the CIT for the foreign companies is reduced from 40% to 35%. The key CIT rates applicable to the Indian companies continue to be applicable as under:
| Category/ Condition for FY 2024-25 (Same as FY 2023-24) | Income Tax Rate (Excluding surcharge and cess) |
| Domestic manufacturing companies incorporated on or after October 1, 2019, and which commence manufacturing on or before March 31, 2024, and have opted for special/ optional tax regime | 15% |
| Companies opting for special/ optional tax regime where exemptions/deductions cannot be claimed | 22% |
| Company with total turnover or gross receipt in the FY 2022-23 not exceeding INR 4 billion | 25% |
| Any other domestic company | 30% |
- The above CIT is further increased by a surcharge at rates mentioned below and a health and education cess @ 4% which remain unchanged from the previous year rates:
- Companies with taxable income exceeding INR 10 million but up to INR 100 million – 7%
- Companies with taxable income exceeding INR 100 million – 12%
- Companies opting for special / optional tax regime (i.e., companies subject to tax rate of 15% or 22% as above) – 10%
Other key direct tax proposals
Individuals
- A private sector employee who pays tax under the ‘tax regime without deduction’ shall be allowed a deduction towards contribution to national pension scheme made by an employer of an amount not exceeding 14% of the employee’s salary (earlier this limit was 10% of the employee’s salary). The benefit of increased rate is not applicable when employee pays tax under the regime with deductions.
- While computing total income under the tax regime without deductions, an individual earning income from salary or pension would be eligible to claim standard deduction up to INR 75,000. Earlier such deduction was INR 50,000.
- The employer is required to withhold taxes (tax deduction at source – TDS) from the payment of salary to employees. While computing TDS, the employee can request the employer to consider income from other heads. The budget proposes to allow employer to consider tax withheld on such other income as well any tax collected at source while determining the TDS. This proposal would be effective from October 1, 2024.
Companies
- In case of private sector employers, any contribution made towards the national pension scheme is allowed as a deduction while computing business income provided it does not exceed the specified percentage of the salary of its employees. The budget increases the deduction for contribution from 10% of salary to 14% of the salary.
- In case of private companies, where the amount received for issuance of shares was higher than the fair market value of such shares, such excess amount was taxable in the hands of the company as income from other sources. This was popularly known as angel tax as it badly affected the investment by angel investors in start-up companies. The budget introduces a sunset clause for this provision whereby this provision will not be applicable from assessment year 2025-26 onwards.
- The Indian Income Tax Act (the Act) provides different tax rates for taxability of short-term and long-term capital gains and the rates also vary based on the nature of assets. The budget introduces the following key changes in respect of capital gains taxation with effect from July 23, 2024:
- It revises the duration of holding of an asset for determination as to whether the gains are taxable as short-term capital gains or long-term capital gains. It is provided that for treatment as long-term capital gains, all listed securities would be required to be held for 12 months or more while for all other assets, the holding period of 24 months or more would be required. Earlier, in case of gold, bonds, and debentures, long-term capital gains would arise when the holding period for such assets was 36 months or more.
- The rate of short-term capital gains tax on the sale of listed equity shares and units of equity-oriented mutual funds (subject to securities transaction tax) is increased from 15% to 20%. In case of long-term capital gains, the budget provides the rate of 12.5% for all categories of assets. Earlier, a 10% rate was applicable to long-term capital gains on listed shares and units of equity-oriented mutual funds (subject to securities transaction tax) while other assets were subject to a 20% long-term capital gains tax rate. The change in rates would also apply to non-resident taxpayers. The rates mentioned above would be increased by the applicable surcharge and cess.
- The exemption for long-term capital gains on listed shares/ MF units will increase from INR 100,000 to INR 125,000. The increased exemption is applicable to all eligible capital gains arising during the FY 2024-25.
- The budget has removed the indexation benefit which was applicable in the calculation of capital gains on long-term capital assets sold after July 23, 2024. The indexation benefit was provided so that the capital gains tax is not charged on the portion of gains which arose due to an increase in prices on account of inflation in the economy. However, considering the feedback from the stakeholders, partial relief was granted whereby in case of long-term gains arising to resident individuals and a Hindu undivided family after July 23, 2024, on the assets in the nature of land and building which are purchased before July 23, 2024, the tax liability will be the lower of the following:
– At a 20% tax rate with indexation benefit.
– At a 12.5% tax rate without indexation benefit.
- Short-term and long-term capital gains on unlisted bonds and debentures would now be chargeable to tax at applicable rates.
- Any amount received from the company on buy back of shares will now be taxed in the hands of recipient as dividends at applicable rates and the capital loss on buy back of shares calculated at issue price of such shares will be allowed to be carried forward. Earlier, companies were required to pay tax at 20% (plus applicable surcharge and cess) on the difference between buy back price and issue price. This amendment is effective for all buybacks which take place on or after October 1, 2024.
- The Act requires e-commerce operators to deduct TDS at 1% on the gross amount of sales or services facilitated through their digital platforms or electronic facilities. To align with the lower TDS and TCS rates for offline transactions, the budget reduces the TDS rate on e-commerce transactions from 1% to 0.1%. This amendment will take effect from October 1, 2024.
- Revision in rate of securities transaction tax (STT) is as follows:
| Transaction | STT rate Oct 1, 2024, onwards | STT rate prior to October 1, 2024 |
| Sale of an option in securities | 0.1% | 0.0625% |
| Sale of a futures in securities | 0.02% | 0.0125% |
- Under the Income-tax Act, a liaison office of a foreign company in India is required to furnish certain statement to the authorities in respect of its activities during the financial year. The budget proposes to levy a penalty for the failure to furnish such statement at the rate of INR 1,000 per day for which the failure continues if the period of failure does not exceed three months. In all the other cases, penalty will be INR 100,000. However, no penalty will be levied if the failure is on account of a reasonable cause.
- The budget abolishes equalization levy at 2% on amount of consideration received/ receivable by an e-commerce operator from e-commerce transactions such as online sale of goods and provision of services including those sale or provision of services facilitated by the e-commerce operators. An “e-commerce operator” is a non-resident who owns, operates, or manages digital or electronic facility or platform for online sale of goods or online provision of services or both.
- In order to comply with the Automatic Exchange of Information (AEOI) framework, a penalty of INR 50,000 under section 271FAA of the Act applicable for providing inaccurate information in the statement of financial transactions/ reportable account by the specified persons is also applicable to failure to comply with due diligence requirement in the statement, without reasonable cause, effective from October 1, 2024.
Indirect Taxes
- The following are key changes in customs duties:
- Basic custom duty (BCD) on mobile phone, mobile Printed Circuit Board Assembly (PCBA) and mobile charger reduced from 20% to 15%.
- Customs duties on gold and silver reduced from 15% to 6% and on platinum from 15.4% to 6.4%.
- BCD increased from 10 to 15% on PCBA of specified telecom equipment.
- 25 critical minerals fully exempted from customs duties and BCD on two critical minerals reduced.
- Capital goods for use in manufacture of solar cells and panels exempted from customs duty.
- BCD exemption in respect of use of any specified parts or components for using in manufacturing lithium-ion batteries extended till March 31, 2026.
- BCD Exemption for electrical energy supplied from Special Economic Zone unit (SEZ Unit) to Domestic Tariff Area (DTA) extended till March 31, 2026.
Other key proposals
- The Finance Minister announced certain incentive schemes for promotion of employment. Under one of the schemes, all first-time employees working in formal sectors will receive amount equal to the one-month wage not exceeding INR 15,000 in three instalments through a direct benefit transfer mechanism. For determining eligibility, first time employees as registered with Employee Provident Fund Organization (EPFO) having salary up to INR 1 lakh per month will be considered. Under another scheme, the government will reimburse to employers up to INR 3,000 per month for 2 years towards their EPFO contribution for each additional employee. Employee with a salary up to INR 100,000 per month will be eligible for this scheme.
Annexure A.
Computation of tax liability at different levels of income under different tax regimes:
| Income INR 1 million |
Income INR 2.5 million |
Income INR 7.5 million |
Income INR 15 million |
Income INR 25 million |
||
| Assumptions/ Allowable deductions | ||||||
| Gross total income (Note 1) | 10,00,000 | 25,00,000 | 75,00,000 | 1,50,00,000 | 2,50,00,000 | |
| Allowable standard deduction (for both tax regimes for FY 2023-24) | 50,000 | 50,000 | 50,000 | 50,000 | 50,000 | |
| Allowable standard deduction (for tax regime without deduction from FY 2024-25 onwards) | 75,000 | 75,000 | 75,000 | 75,000 | 75,000 | |
| Professional tax or tax on employment (applicable for old tax regime) | 2,500 | 2,500 | 2,500 | 2,500 | 2,500 | |
| Other deductions (Note 2) | 3,50,000 | 3,50,000 | 3,50,000 | 3,50,000 | 3,50,000 | |
| (i) Tax Regime with deductions for FY 2024-25 & FY 2023-24 (No change) | ||||||
| Taxable income | 5,97,500 | 20,97,500 | 70,97,500 | 1,45,97,500 | 2,45,97,500 | |
| Tax payable | 32,000 | 4,41,750 | 19,41,750 | 41,91,750 | 71,91,750 | |
| Surcharge | – | – | 1,94,175 | 6,28,763 | 17,97,938 | |
| Cess | 1,280 | 17,670 | 85,437 | 1,92,821 | 3,59,588 | |
| Total liability | 33,280 | 4,59,420 | 22,21,362 | 50,13,333 | 93,49,275 | |
| (ii) Tax Regime without deduction from FY 2024-25 onwards (Default regime) | ||||||
| Taxable income (Standard deduction of INR 75,000 available from FY 2024-25) | 9,25,000 | 24,25,000 | 74,25,000 | 1,49,25,000 | 2,49,25,000 | |
| Tax payable | 42,500 | 417,500 | 1,917,500 | 4,167,500 | 7,167,500 | |
| Surcharge | 0 | 0 | 191,750 | 625,125 | 1,791,875 | |
| Cess | 1,700 | 16,700 | 84,370 | 191,705 | 358,375 | |
| Total liability | 44,200 | 4,34,200 | 21,93,620 | 49,84,330 | 93,17,750 | |
| Income INR 1 Million |
Income INR 2.5 million |
Income INR 7.5 million |
Income INR 15 Million |
Income INR 25 Million |
||
| (iii) Tax Regime (without deduction) for FY 2023-24 (Default Regime) | ||||||
| Taxable income (Standard deduction of INR 50,000 available from FY 2023-24) | 9,50,000 | 24,50,000 | 74,50,000 | 1,49,50,000 | 2,49,50,000 | |
| Tax payable | 52,500 | 4,35,000 | 19,35,000 | 41,85,000 | 71,85,000 | |
| Surcharge | 0 | 0 | 1,93,500 | 6,27,750 | 17,96,250 | |
| Cess | 2,100 | 17,400 | 85,140 | 1,92,510 | 3,59,250 | |
| Total liability | 54,600 | 4,52,400 | 22,13,640 | 50,05,260 | 93,40,500 | |
| Final tax liability under beneficial tax regime at given income levels. | ||||||
| FY 2024-25 [lower of tax liability as per (i) or (ii)] | 33,280 | 4,34,200 | 21,93,620 | 49,84,330 | 93,17,750 | |
| FY 2023-24 [lower of tax liability as per (i) or (iii)] | 33,280 | 4,52,400 | 22,13,640 | 50,05,260 | 93,40,500 | |
| Savings/ (Additional outgo) in FY 24-25 as compared to FY 23-24 | – | 18,200 | 20,020 | 20,930 | 22,750 | |
Notes/ assumptions:
1. Gross income includes salary which is assumed to be more than INR 50,000. Income presumed to not include dividends and capital gains.
2. Other deductions assumed for calculation are deduction u/s 80C (Provident fund, life insurance premium, etc) of INR 150,000 and interest on
housing loan for self-occupied house of INR 200,000.
3. Calculation is for a person below the age of 60 years
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