01/02/2025
*Budget Speech Summary: Tax Reforms and Key Proposals*
• The government aims to simplify taxation as part of its broader vision for Vikasith Bharat (Developed India).
• A new Income Tax Bill will reduce the complexity of current laws, featuring clearer and more concise provisions, cutting both chapters and words by half.
• Focus areas include good governance, reduced litigation, tax certainty, and responsive policymaking, guided by the principle of sabka saath, sabka vikas.
*Tax Rate Structure Revisions*
1. No Tax on Income Up to ₹12 Lakh
• Individuals earning up to ₹12 lakh annually (₹1 lakh per month) will pay no income tax under the new tax regime.
• For salaried taxpayers, due to the ₹75,000 standard deduction, this threshold is ₹12.75 lakh.
2. *Revised Tax Slabs and Rates*
• 0 – ₹4 lakh: 0%
• ₹4 – ₹8 lakh: 5%
• ₹8 – ₹12 lakh: 10%
• ₹12 – ₹16 lakh: 15%
• ₹16 – ₹20 lakh: 20%
• ₹20 – ₹24 lakh: 25%
• Above ₹24 lakh: 30%
3. Tax Rebates and Benefits
• Taxpayers earning up to ₹12 lakh (excluding special income like capital gains) will receive a rebate, resulting in zero tax payable.
• Examples of benefits from the new regime:
• Income ₹12 lakh: ₹80,000 tax benefit (100% reduction from existing rates).
• Income ₹18 lakh: ₹70,000 tax benefit (30% reduction).
• Income ₹25 lakh: ₹1,10,000 tax benefit (25% reduction).
• These reforms aim to increase disposable income, promoting household consumption, savings, and investments.
4. Revenue Impact
• An estimated ₹1 lakh crore in direct taxes and ₹2,600 crore in indirect taxes will be foregone as a result of these proposals.
Other Major Tax Proposals
1. TDS and TCS Reforms
• Reduction in the number of TDS rates and thresholds for simplification.
• Increase in tax deduction limits:
• Senior citizens’ interest deduction limit raised from ₹50,000 to ₹1 lakh.
• TDS threshold for rent payments increased from ₹2.4 lakh to ₹6 lakh annually.
• TCS threshold for remittances under RBI’s Liberalized Remittance Scheme (LRS) increased from ₹7 lakh to ₹10 lakh.
• TCS exemption for educational remittances funded by loans from specified financial institutions.
• Higher TDS provisions to apply only to non-PAN holders.
2. *Voluntary Compliance and Updated Returns*
• Time limit for filing updated returns extended from 2 to 4 years.
• The government highlights the success of the updated return facility introduced in 2022, with nearly 90 lakh taxpayers voluntarily updating their incomes.
3. Charitable Trusts and Compliance Relief
• Registration period for small charitable trusts extended from 5 to 10 years.
• Provisions to prevent disproportionate penalties for minor compliance errors.
4. Property and Transfer Pricing Reforms
• Taxpayers can now claim the benefit of two self-occupied properties without conditions.
• Introduction of a 3-year block period scheme for determining arm’s length pricing of international transactions.
• Expansion of safe harbor rules to reduce litigation and provide tax certainty in international taxation.
5. Senior Citizen Benefits
• Exemption for withdrawals from National Savings Scheme (NSS) accounts with no interest accrual after August 29, 2024.
• Extension of similar benefits to NPS (Vatsanya) accounts.
6. Digitalization and Dispute Resolution
• Implementation of paperless, digital processes for tax orders and appeals.
• The Vivaat Se Vishwaas dispute resolution scheme has seen 33,000 taxpayers settle disputes.
Measures for Investment and Employment Promotion
1. Presumptive Taxation for Non-Residents
• A new presumptive taxation scheme for non-residents providing services to electronics manufacturing facilities in India.
2. Safe Harbor for Electronics Manufacturers
• Tax certainty for non-residents storing components for supply to electronics manufacturers.
3. Tonnage Tax Extension
• Extension of the tonnage tax scheme to inland vessels registered under the Indian Vessels Act 2021 to promote inland water transport.
4. Startup Ecosystem Support
• Extension of startup benefits to companies incorporated before April 1, 2030, by an additional five years.
5. IFSC Investment Incentives
• Specific benefits proposed for ship leasing units, insurance offices, and treasury operations in the International Financial Services Centre (IFSC).
