India's Budget 2024: Small Changes, Big Impact

India's Budget 2024: Small Changes, Big Impact

The maiden budget of Modi 3.0 Government has set a bold agenda for the next five years with a plethora of schemes and significant policy changes aimed at reshaping India's economic landscape. Among the most notable are the amendments in direct tax provisions, each promising profound implications for taxpayers across the nation.

Key Changes and Their Impacts

1. Angel Tax Abolished: One of the most eagerly awaited reforms, the removal of Angel Tax brings relief to the startup ecosystem. This move is expected to stimulate investment in innovative ventures and foster entrepreneurial growth.

2. Indexation Benefits Modified: While indexation benefits for immovable properties have been removed, the Long Term Capital Gain (LTCG) tax rate has been reduced to 12.50% from 20%. Conversely, the LTCG tax rate on securities has increased from 10% to 12.50%. These changes aim to simplify taxation while impacting individuals and investors differently based on their asset portfolios.

3. Short Term Capital Gains Tax Increased: The Short Term Capital Gains (STCG) tax rate has been raised to 20% from 15%, impacting stock market investors. This adjustment seeks to align tax rates with market dynamics and revenue needs.

4. Buyback of Shares Taxation: Reintroduction of shareholder taxation on buyback of shares shifts the tax burden from companies to shareholders. Moreover, higher tax rates on dividends for High Net Worth Individuals (HNIs) aim to balance fiscal deficits while incentivizing reinvestment.

5. Charitable Trust Reforms: Simplification through the merger of Sections 10(23C) and 12A streamlines the process of registration and operations for charitable trusts. These reforms aim to enhance transparency and efficiency in the sector.

6. Foreign Assets: Clear thresholds have been defined to alleviate complexities for taxpayers with foreign assets. Transactions up to Rs 10 lakh face no penalties, with a higher threshold of Rs 20 lakh applicable to immovable properties. These measures aim to ease compliance burdens and encourage repatriation of overseas assets.

Implications and Future Prospects

The strategic changes in direct tax provisions outlined in Budget 2024 reflect the government's commitment to economic reform and fiscal prudence. While some adjustments seek to stimulate economic activities and investments, others aim to streamline tax administration and enhance compliance.

Conclusion

India's Budget 2024 introduces pivotal reforms that underscore the government's proactive approach towards economic revitalization and inclusive growth. As these reforms take effect, their impact on taxpayers and various sectors of the economy will unfold, shaping India's trajectory towards becoming a $5 trillion economy. The careful calibration of tax policies reflects a balancing act between revenue generation, incentivizing investments, and ensuring equitable growth across diverse segments of society.

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