Reaching out to the middle class, Union Finance Minister Nirmala Sitharaman on Tuesday announced major income tax relief from which four crore salaried individuals and pensioners stand to benefit. She also made it known that the Government will undertake a comprehensive review of the Income Tax Act.
Presenting Modi 3.0 Government’s first Budget after the recently held general elections, the Finance Minister also abolished “angel tax” for all classes of investors in startups, cut customs duty on mobile phones and gold and simplified capital gains tax.
Unveiling the Budget proposals in the Lok Sabha, Sitharaman said, “India’s economic growth continues to be the shining exception (in a world that is gripped by policy uncertainties) and will remain so in the years ahead.”
“In this Budget, our primary focus is on employment generation, skilling, MSMEs, and the middle class,” stated Sitharaman, the first FM to have presented seventh consecutive Budget.
Elaborating upon the relief for the middle class, Sitharaman pointed to the hike in standard deduction — a flat deduction from total salary earned by an employee in a year before calculating applicable income tax rate — by 50 per cent to `75,000 and tweaked tax slabs for taxpayers opting for the new income tax regime.
This will lead to taxpayers under the new tax regime, which offers lower rates of taxes but permits limited deductions and exemptions, saving up to `17,500 in tax annually, she said.
Sitharaman said the Government would release standard operating procedures for TDS defaults and simplify and rationalise the compounding of such offences.
“The Budget proposes a comprehensive review of the customs duty structure over the next six months; reduction of TDS rate on e-commerce to 0.1 per cent besides, merger of two tax exemption regimes for charities into one. I propose to decriminalise TDS delay up to the filing of tax return,” she said. “More than two-thirds of individuals have opted for the new income-tax regime,” she revealed.
The Finance Minister announced the Government has increased the income tax standard deduction for those who have opted for the new tax regime.
“For the salaried employees who have opted for the new tax regime, the standard deduction is being increased from Rs 50,000 to Rs75,000,” she said.
The 2024-25 Budget has revised the tax slabs for those who have opted for the new regime. “Under the new tax regime, tax rate structure to be revised is as follows:
Rs 0- Rs 3 lakh -Nil; Rs 3-7 lakh -5 per cent; Rs 7-10 lakh-10 per cent; Rs10-12 lakh-15 per cent; Rs12-15 lakh- 20 per cent and above Rs 15 lakh-30 per cent,” she announced.
Sitharaman said salaried employees under the new tax regime will save up to Rs17,500 annually in taxes due to changes proposed in the Budget.
She said the deduction on family pension for pensioners will be enhanced from Rs15,000 to Rs 25,000. In total, 4 crore salaried individuals and pensioners stand to benefit from the changes.
She said the government has raised the deduction limit for the employer’s contribution to NPS from 10 per cent to 14 per cent. It has also withdrawn the equalisation levy of 2 per cent.
Sitharaman said the monetary limit for filing tax appeals will be increased to Rs 60 lakhs for ITAT, Rs 2 crore for high courts and Rs 5 crore for the Supreme Court.
She also announced the Government’s decision to abolish the Angel tax. “Corporate tax rate to be reduced on foreign companies from 40 to 35 per cent,” Sitharaman added.
To spur employment generation, the Budget provides for incentives for companies, including paying one-month salary for first-time employees, incentive at specified sale to both employees and empowers with respect to their retirement fund contribution in the first four years of employment and reimbursing employers up to Rs 3,000 per month for two years towards EPFO contribution of each additional employee.
Also, a programme to improve skills as well as internship for students and subsidised loans for higher education are proposed in the Budget.
Encouraged by robust tax collections and a higher-than-expected dividend receipt from the Reserve Bank, Sitharaman said the Government’s fiscal deficit — the difference between the total revenue earned and total expenditure — will be trimmed to 4.9 per cent of the GDP in 2024-25, below the 5.1 per cent figure estimated in the interim budget she had presented in February this year. She reduced gross market borrowing marginally to Rs 14.01 lakh crore.
The Budget for 2024-25 fiscal (April 2024 to March 2025) has allocated Rs 1.52 lakh crore for agriculture and allied sectors, proposes aid for building 3 crore affordable housing units in urban and rural areas, credit support to small and medium businesses, raising of loan for small business to Rs 20 lakh, setting up 12 industrial parks, and includes proposal for setting up a Rs 1,000-crore venture capital fund for space sector.
