Decoding the Union Budget 2024-2025: Key Highlights and Implications for India

KEY HIGHLIGHTS-Income Tax

• Income tax slab under New Regime No tax up to Rs 3 lakh income
  Rs 3 -7 lakh 5 per cent, Rs 7-10 lakh 10 per cent ,Rs 10-12 lakh 15 per cent, Rs 12-15 lakh 20 per cent, Above Rs 15 lakh 30 per cent

• Standard Deduction under the New Tax Regime raised to Rs 75,000 for salaried employees.

• Deduction on family pension for pensioners increased from Rs 15,000 to Rs 25,000.

• Capital Gain

  No Indexation benefit under second proviso to section-48 of income tax act,1961 for any long-term capital gain.

  Short-term capital gain under section-111A for STT paid equity shares, Unites of equity oriented mutual fund,Unites of business trust from 15% to 20%

  Short term capital gain for all other assets(No change)

  Long term capital gain under section-112A to STT paid equity shares, Unites of equity oriented mutual fund, Unites of business trust from 10% to 12.5% (Exemption Rs. 125000)

  Long-term capital gains for unlisted shares and immovable property under section-112 from 20% indexation to 12.5% without indexation

  Long-term capital gain under section-112 for listed bonds and debentures from 20% with indexation to 12.5% without indexation

  The budget has removed the indexation benefit available on all immovable assets like real estate. Property sellers will now not be able to inflate their purchase price and reduce their capital gains. Long-term capital gains (LTCG) tax on immovable properties reduced to 12.5 per cent from 20 per cent, but removed the indexation benefits to adjust for inflation.

• Securities Transaction Tax (STT) on the sale of an Option increased to 0.1 per cent from 0.0625 per cent. STT on F&O (futures and options) securities hiked by 0.02 per cent and 0.1 per cent.

• TDS on e-commerce cut to 0.1 percent from 1 percent

  Section 194D - Payment of insurance commission (in case of person other than company)5% to 2% from 01/04/2025

  Section 194DA - Payment in respect of life insurance policy 5%to 2% from 01/10/2024

  Section 194G - Commission etc on sale of lottery tickets 5%to 2% from 01/10/2024

  Section 194H - Payment of commission or brokerage 5%to 2% from 01/10/2024

  Section 194-IB - Payment of rent by certain individuals or HUF 5%to 2% from 01/10/2024

  Section 194M - Payment of certain sums by certain individuals or Hindu undivided familyf 5%to 2% from 01/10/2024

  Section 194-O - Payment of certain sums by e-commerce operator to e-commerce participant from 1% to 0.1% from 01/10/2024

  Section 194F relating to payments on account of repurchase of units by Mutual Fund or Unit Trust of India Proposed to be omitted from 01/10/2024

  TDS on payment of salary, remuneration, interest, bonus or commission by partnership firm to partners : (w.e.f.01/04/2025)

  Payment made to partner as Salary, Remuneration, Bonus, Commission, Interest to any account(including capital account) subject to TDS @ 10% (Rs. 20,000 in a FY)

• There will be only two holding periods, 12 months and 24 months, for determining whether the capital gains is short-term capital gain or long-term capital gain

• Corporate tax rate for foreign companies reduced from 40% to 35%

• The rules for reopening and reassessment have been relaxed. Assessments can now be reopened beyond three years from the end of the assessment year only if the undisclosed income amounts to Rs 50 lakh or more, with a maximum period of five years from the end of the assessment year.

Allowable remuneration to partners as per new provisions: (w.e.f. A.Y.2025-26) on first 6 lac (3 Lac or 90% whichever is more ) and on remaining profit 60%.

KEY HIGHLIGHTS-GST

• Section 73 and 74 of the CGST Act, 2017 – To provide for common time limit for issuance of demand notices and orders irrespective of whether case involves fraud, suppression, willful misstatement etc., or not

• New Section 74A in the CGST Act, Section 74A is being inserted in the CGST Act to provide a common time limit for the issuance of demand notices and orders in respect of demands for FY 2024-25 onwards, for cases involving charges of fraud, suppression of facts or wilful misstatement, and the cases not involving the charges of fraud, suppression of facts or wilful misstatement, etc. Also, the time limit for the taxpayers to avail the benefit of reduced penalty, by paying the tax demanded along with interest, is being increased from 30 days to 60 days. (for ease of section 73 and 74)

• Insertion of Sub-section (5) in Section 16, with a retrospective effect w.e.f. 01.07.2017 – In respect of an invoice or debit note for the Financial Years 2017-18, 2018-19, 2019-20, and 2020-21, the registered person shall be entitled to take input tax credit in any return under section 39 which is filed up to the 30th day of November, 2021.

• Insertion of Sub-section (5) in Section 16, with a retrospective effect w.e.f. 01.07.2017 – The time limit to avail input tax credit in respect of an invoice or debit note, in cases where returns for the period from the date of cancellation of registration/effective date of cancellation of registration till the date of revocation of cancellation of the registration, will be extended till the date of filing the said GSTR-3B return, subject to certain conditions, if the said return is filed by the registered person within thirty days of the order of revocation of cancellation of registration.

• Section 112 of the CGST Act, 2017 – Time for filing appeals in GST Appellate Tribunal, to allow 3 months period for filing appeals before GSTAT to start from a date to be notified by the Government in respect of appeals/ revision orders passed. This would have effect from 01.08.2024.
  Also, reducing the amount of pre-deposit required to be paid for filing the GSTAT appeals.

• Section 122 of the CGST Act – Relating to Penalty provisions on E-commerce operators

• Section 128A – Section 128A is being inserted in the CGST Act to provide for a conditional waiver of interest and penalty in respect of demands pertaining to financial years 2017-18, 2018-19, and 2019-20, in cases where demand notices have been issued under section 73 and full tax liability is paid by the taxpayer before a date to be notified.

• Section 11A – Section 11A is being inserted to empower the government to regularize non-levy or short levy of central tax due to any general practice prevalent in trade. Similar power is being proposed in IGST Act, UTGST Act, and GST (Compensation to States) Act.

• Section 140 of the CGST Act – To allow transitional credit for service invoices received by the IGST before the appointed date. Amendment would have an retrospective effect from 01.07.2017.

• Section 171 of the CGST Act – To introduce a sunset clause for Anti-Profiteering measures and align these cases to the GSTAT (GST Tribunal)

• Section 54 of the CGST Act and Section 16 of the IGST Act – To restrict IGST refunds for goods subject to export duty, including those exported or supplied to SEZs, regardless of with or without payment of tax.

• Section 9 of the CGST Act 2017 – Section 9 is being amended to take Extra Neutral Alcohol used in the manufacture of alcoholic liquor for human consumption out of the purview of central tax. Similar amendments are also proposed in IGST Act and UTGST Act.

• Section 39 of the CGST Act, 2017 – To provide registered persons required to deduct tax u/s 51 must file return in FORM GSTR-7 monthly, even if no tax has been deducted.

• Reduce the Maximum Amount of Pre-Deposit for Filing Appeals: Sections 107 and 112 of CGST Act are being amended to reduce the maximum amount of pre-deposit for filing an appeal with the Appellate Authority from Rs. 25 crore of central tax to Rs. 20 crore of central tax and to reduce the amount of pre-deposit for filing an appeal with the Appellate Tribunal from 20% with a maximum amount of Rs. 50 crore of central tax to 10% with a maximum of Rs. 20 crore of central tax. Besides, the time limit for filing appeals before the Appellate Tribunal is being modified w.e.f. 1st August 2024 to avoid the appeals from getting time-barred, on account of Appellate Tribunal not coming into operation.

• Enable Availment of the Transitional Credit of Eligible CENVAT Credit by Input Services Distributor in Respect of Invoices Received Prior to the Appointed Date: Section 140(7) of CGST Act is being amended with effect from 01.07.2017, to enable availment of transitional credit in respect of input services received by an Input Services Distributor prior to the appointed day, where invoices were also received prior to the appointed day.

• Empower Government to Notify Appellate Tribunal to Handle Anti-Profiteering Cases and to Provide for a Sunset Clause for Accepting Anti-Profiteering Cases: Section 171 of CGST Act is being amended to enable the Government to notify the GST Appellate Tribunal to handle anti-profiteering cases and to empower the Government to notify a date after which the Authority for anti-profiteering shall not accept applications for examination.

• Clarify Various Activities in Insurance Sector as Neither a Supply of Goods nor a Supply of Services: Paragraphs 8 and 9 are being inserted in Schedule III of CGST Act to provide that the activity of apportionment of co-insurance premiums by the lead insurer to the co-insurers in the co-insurance agreement and the services by insurers to reinsurers in respect of ceding/re-insurance commission will, subject to certain conditions, be treated neither as a supply of goods nor as a supply of services.

• Time of Supply of Services in Reverse Charge Supplies: Amendment is proposed in Section 13 of CGST Act to provide for the time of supply of services where the invoice is required to be issued by the recipient of services in cases of reverse charge supplies.

• Restrict Blockage of Input Tax Credit for Tax Paid Under Section 74 to Demands Up to Financial Year 2023-24: Clause (i) of Section 17 of CGST Act is being amended to restrict blockage of input tax credit for tax paid under Section 74 for demands pertaining up to FY 2023-24.

• Provide for Conditions and Restrictions for Revocation of Cancellation of Registration: Section 30 of the CGST Act is being amended to enable the government to prescribe conditions and restrictions for revocation of cancellation of registration.

• Amendment to Prescribe the Time Period for Issuance of Invoice by Recipient in Reverse Charge Mechanism Supplies: Clause (f) of section 31 of CGST Act is being amended to provide for an enabling provision to prescribe the time period within which the invoice has to be issued by the recipient under reverse charge mechanism and to clarify that a person registered solely for the purpose of deducting TDS under section 51 of CGST Act shall be treated as a person not registered for the purpose of clause (f) of section 31(3) of the said Act.

• Amendment to Make Filing of Monthly Returns by TDS Deductors Mandatory: Section 39 is being amended to mandate filing of returns by TDS deductors for every month, even if no deductions are made during the said month, and also to provide for an enabling clause for prescribing the time limit for filing such returns.

• Amendment to Prohibit Refund in Zero Rated Supply of Goods Where Such Goods are Subjected to Export Duty: Section 54 of CGST Act and section 16 of IGST Act are being amended to prohibit refund of unutilized input tax credit or integrated tax on zero-rated supply of goods, which are subjected to export duty.

• Amendment for Allowing Appearance by Authorized Representative on Behalf of a Summoned Person: Sub-section 1A is being inserted in section 70 of the CGST Act to enable appearance by an authorized representative on behalf of a summoned person.

• Amendment to Empower the Government to Notify Cases Which Shall be Heard Only by the Principal Bench of GST Appellate Tribunal: Section 109 of CGST Act is being amended to empower the government to specify cases to be heard only by the Principal Bench of the Appellate Tribunal.

• Amendment to Restrict Applicability of Penal Provisions Under Section 122(1B) to Electronic Commerce Operators Who Deduct TCS: Section 122(1B) of CGST Act is being amended w.e.f. 01.10.2023 to restrict the applicability of penal provisions under this section to only those Electronic Commerce Operators who are required to collect tax at source under section 52.