Income Tax Slabs Changes
The new budget for 2024 has introduced several tax changes that will benefit salaried employees and pensioners. Increased standard deduction of salaried employees from ₹ 50,000/- to ₹ 75,000/- for those opting for new tax regime. Similarly, deduction on family pension for pensioners enhanced from ₹ 15,000/- to ₹ 25,000/-.The new tax regime offers a simpler structure with reduced tax rates and increased standard deduction, benefiting salaried employees. However, it’s essential to note that this regime has fewer deductions and exemptions compared to the old regime.
New Tax Incentives For Start-ups
The budget has indeed extended the tax holiday for startups by one more year, allowing eligible startups to enjoy a total exemption of four years out of their first ten years from taxes on profits. This is a significant relief for emerging companies that are struggling to grow and scale.
Additionally, the government has proposed the development of a digital platform for end-to-end Startup India registration and availing tax exemptions, which will further simplify the process and reduce compliance burdens. This platform will likely provide a seamless and streamlined experience for startups to register and access various benefits, including tax exemptions, in a hassle-free manner.
Corporate Tax Rates and What They’re Betting
Any company that is considering any financial planning will be aware of the significance of the corporate tax rate. The budget has maintained the corporate tax rate at 22% for domestic companies, provided they don’t claim any exemptions or incentives. By retaining the 22% corporate tax rate, India remains competitive with other countries. The continued 15% rate for new manufacturing companies encourages investment, production, and job creation in this sector. Extended the lower corporate tax rate of 15% for new manufacturing companies that were incorporated after October 1, 2019 and commenced operations before March 31, 2024.
Additional corporate tax highlights Foreign companies’ tax rate reduced from 40% to 35% ad no changes in Minimum Alternate Tax (MAT) rate.
These measures demonstrate the government’s focus on promoting ‘Make in India’ initiatives, encouraging foreign investment, supporting economic growth.
More Digital Transactions
Take New Initiatives for Encouraging Digital Transactions and to Limit Cash Use: In the last budget has proposed various steps relating to this domain. Importantly one of the major changes that happened is the decrease in turnover threshold for businesses filing mandatory TDS/TCS Return. Now, companies over one crore turnover in the previous financial year will have to deduct TDS on payments exceeding Rs 50 lakh a single party.
The government aims to create a less-cash economy by incentivizing digital transactions and discouraging cash usage.
Changes in the Faceless Assessment Scheme
A faceless assessment scheme was launched with a motive to obviate the need for taxpayers and tax authorities to interact, which they believed would have minimized corruption. The budget has introduced some improvements on this front, which would help in the betterment of the scheme as well making it more friendly for taxpayers. Taxpayers will also have the option to respond along with submitting their documents online, which means they are not needed to physically appear before tax officials under the new rules. This, in turn, is aimed at reducing litigation period thereby leading to a much faster resolution of tax disputes and an enhanced taxpayer service.
Impact on MSMEs
The budget has introduced measures to support MSMEs, including extension of the Emergency Credit Line Guarantee Scheme (ECLGS) till March 2024, providing relief to MSMEs and Tax benefits for MSMEs that adopt digital payments and meet Income Tax Returns and Company Annual Filing obligations.
These measures aim to help MSMEs recover from the economic impact of the COVID-19 crisis, encourage digital adoption and compliance, prepare MSMEs for the post-pandemic period.
The government’s support for MSMEs is crucial, as they are a vital part of the economy, providing employment and driving growth. By extending the ECLGS and offering tax benefits, the government is helping MSMEs access credit, reduce financial stress, and focus on growth and development.
Changes in GST Compliance
The Union Budget 2024 has introduced several changes to GST compliance, aiming to simplify and enhance the efficiency of the GST system. The changes include a simplified return filing process, auto-population of returns, and reduced frequency of returns for small taxpayers. A compliance rating system has been introduced, where taxpayers will be rated based on their compliance history, including timely and accurate filing of returns, payment of taxes, and other related filings. E-invoicing has been made mandatory for businesses with a turnover of ₹10 crore or more, and QR codes will be introduced on invoices for verification. Additionally, changes have been made to the Input Service Distributor (ISD) mechanism, including mandatory registration, redefined roles, and specified distribution processes.
Anti fraud measures have also been introduced, including controls to prevent fake invoicing, Input Tax Credit (ITC) fraud detection, and enhanced data analytics. Other changes include mandatory Aadhaar authentication for GST registration, dynamic QR codes on invoices, and enhanced penalty provisions for non-compliance.
Digital Tax On E-Commerce Introduced
The budget has introduced a digital tax, also known as the Equalization Levy, on e-commerce transactions, targeting foreign companies with no physical presence in India but receiving substantial revenue from Indian users. This tax will apply to digital e-commerce and services, including online sales of goods, provision of services through digital platforms, and advertisement revenues. The move aims to level the playing field for domestic e-commerce companies and increase government revenue. The Equalization Levy will be charged at a rate of 2% of the transaction value, applicable to foreign companies with annual revenues exceeding ₹2 crores from Indian users. Certain transactions, like software downloads, may be exempt from this tax. This digital tax addresses the tax gap created by foreign companies without a physical presence, supports domestic e-commerce companies, and contributes to government revenue. The Equalization Levy is not a new concept, but the budget has expanded its scope to include e-commerce transactions, making it a significant development in the taxation of digital transactions.
