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Government of India has presented its Budget for the fiscal year 2024-25 on 23rd July 2024, wherein government has focused on Sectoral Development by identifying Priority Sectors and proposing various Reforms for these Sectors.
Priority Sectors of Indian Government for fiscal year 2024-25:
Priority Sector 1: Employment & Upskilling
1.Employment Linked Incentives:
2. Other announcements benefitting women and youth:
Priority Sector 2: Manufacturing and MSME
Priority Sector 3: Next GEN Reforms Proposed
1.Change in the Income Tax Slab Rates for Individuals filing their ITR under the new Income Tax Regime
2. Standard Deduction: To incentivize the salaried taxpayers to switch to a new income tax regime, standard deduction has been proposed to increase from Rs. 50,000 to Rs. 75,000.
3. Family Pension: In addition, the Government has also proposed to increase the benefit of deduction for family pension income from Rs. 15,000 to Rs. 25,000.
4. Abolishment of Angel Tax: Government has proposed to abolish the Angel Tax in a bid to strengthen the startup ecosystem and to support innovation in the country.
5. Income under House Property (Section 28): Income earned by renting out a residential house or part of it by the owner will be taxed under the category of “Income from house property,” not under “Profits and gains of business or profession.” This will have the effect of not allowing the business expenditure against such income
6. Employer Contribution to Pension Scheme (Section 36): Non-government employers paying their contribution towards pension scheme under section 80CCD shall be entitled to higher deduction of 14% instead of existing 10% of the salary of the employees whose salary will be taxable under the new income tax regime.
7. Capital Gain: Finance Bill 2024 has proposed some major changes in the taxation of capital gain, including definition of short term and long-term capital gain and their tax rates:
8. Changes in TDS and TCS
9. Equalization Levy
10. Incentives and Reliefs
10.1 Direct Tax Vivad se Vishwas Scheme 2024
A new scheme has been introduced to reduce litigation and expedite the settlement of disputed issues. This scheme aims to provide a swift resolution mechanism for taxpayers involved in disputes with the tax authorities, thereby reducing the burden of prolonged litigation.
10.2 Incentives for International Financial Services Centres (IFSCs)
To promote the development of world-class financial infrastructure in India, several tax concessions have been provided to units located in IFSCs. These include exemptions for specified funds and core settlement guarantee funds, as well as relaxation of thin capitalisation rules for finance companies in IFSCs
10.3 Promotion of Domestic Cruise Ship Operations
To boost the cruise shipping industry in India, a presumptive taxation regime is introduced for non-resident cruise ship operators. This regime deems 20% of the aggregate amount received or receivable as profits and gains from the business of cruise shipping. Additionally, lease rentals paid by companies under this regime are exempt in the hands of the recipient company if both companies are subsidiaries of the same holding company.
11. Simplification and Rationalization
11.1 Block Assessment for Search Cases
The Bill proposes to reintroduce the scheme of block assessment for search cases. This aims to consolidate assessments for the block period, reduce litigation costs, and ensure coordinated investigation during search assessments. The block period will consist of six assessment years preceding the previous year in which the search was initiated, plus the period from 1st April of that year to the date of the last authorisation.
11.2 Rationalisation of Reassessment Provisions
The reassessment provisions under sections 147 to 151 have been rationalised to reduce litigation and provide clarity. The time limit for issuing notice under section 148 has been reduced, and the procedure for conducting inquiries before issuing notice has been streamlined.
11.3 Amendment to Section 245
Section 245, relating to the set-off and withholding of refunds, has been amended to provide a clearer framework for the adjustment of refunds against outstanding tax demands. The period for withholding refunds has been extended to 60 days from the date of assessment.
11.4 Rationalisation of Assessment Timelines
The Finance Bill, 2024, proposes significant changes to the timelines for assessment and reassessment. The new timelines aim to expedite the assessment process and reduce uncertainty for taxpayers. Key changes include:
12. Provisions for Charitable Trusts and Institution
12.1 Merger of Exemption Regimes: To simplify the regulatory framework for charitable trusts and institutions, the Bill proposes to sunset the first regime under section 10(23C) and transition all entities to the second regime under sections 11 to 13. This will streamline the approval and registration processes and reduce administrative burden.
12.2 Condonation of Delay
The Bill introduces provisions allowing the Principal Commissioner or Commissioner to condone delays in filing applications for registration under section 12AB if reasonable cause is shown. This aims to prevent undue hardship for trusts and institutions.
12.3 Rationalisation of Timelines
Timelines for filing applications for approval under section 80G and for processing such applications have been rationalised to ensure timely grant of approvals and registrations.
13 Taxation of Buyback of Shares
13.1 Tax on Distributed Income
The Finance Bill, 2024, proposes a tax on the distributed income arising from the buyback of shares by domestic companies. This tax is aimed at addressing the practice of companies distributing accumulated profits through share buybacks rather than dividends, which are subject to dividend distribution tax.
Finance Bill 2024 has proposed to amend the customs duty and BCD (Basic Custom Duty) on various items as tabulated below:
1.Levy of Tax & Schedule III (Section 9)
– Section 9 is proposed to be amended to exclude rectified spirit / Extra Neutral Alcohol (ENA) used for manufacture of alcoholic liquor for human consumption from the levy of GST.
– The following activities/transactions to be included in Schedule III to the CGST Act:
2. Power not to recover Goods and Services Tax not levied or short-levied as a result of general practice (Section 11A – New Section)
3. Time of Supply in case of Reverse Charge Mechanism (Section 13(3))
Section 13(3) has been amended to draw a line between Tax Invoices issued by supplier and Self-Invoices to be issued by the recipient in cases where the supplier is unregistered. Thus, the TOS in case of RCM shall the earliest of the following dates:
4. Time limit to issue Self – Invoice (Section 31)
Section 31(3)(f) has been proposed to be amended to introduce a time limit to issue invoices in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both. Further an explanation has been added to include supplier who is registered solely for the purpose of deduction of tax under section 51.
5. Time Limit to claim ITC (Section 16 (5) & (6) – New Addition)
6. Sunset of Section 73 & 74 and Sunrise of Section 74A
7. Revocation of cancellation of registration (Section 30)
A proviso has been proposed to be inserted in section 30(2) to follow conditions and restrictions, as may be prescribed for revocation of cancellation of registration.
8. Summon (Section 70)
Section 70 has been amended to bound the person summoned to attend, either in person or by an authorised representative and shall state the truth during examination or make statements or produce such documents and other things as may be required.
9. Section 109
Section 109 to be amended to provide for handling of anti-profiteering cases by the Principal Bench of the GST Appellate Tribunal.
10. Section 112
11. Section 122(1B)
Retrospective amendment to Section 122(1B) of the CGST Act with effect from 1st October 2023 to provide that the said penal provision shall be applicable only on those E-commerce Operators (‘ECOs’) who are liable to collect tax under the provisions of Section 52 of the CGST Act.
12. Section 128A
13. Section 140(7)
Section 140(7) to be amended retrospectively with effect from 1 July 2017 to allow transitional credit on invoices pertaining to services provided before 1 July 2017 and where the invoices were received by the Input Service Distributor (ISD) before such date.
14. Section 171
Section 171 to be amended to provide for a sunset clause for anti-profiteering under the GST law. The sunset clause for receipt of new application regarding anti-profiteering is recommended to be 1 April 2025.
15. Section 16 of the IGST Act r/w Section 54 of the CGST Act
Exporters of goods which attract export duty shall not be eligible for claiming refund under section 54 of the CGST Act, 2017 and Section 16 of the IGST Act, 2017. Such restriction shall also apply to similar goods being supplied to SEZ developer or SEZ unit for authorized operations.
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