Union Budget 2024: New Tax Regime Offers Major Relief and Incentives

Finance Minister Nirmala Sitharaman presented the Union Budget 2024-25. Earlier that day, Sitharaman met with President Droupadi Murmu before heading to Parliament. This marked Sitharaman’s seventh consecutive budget, surpassing the late Morarji Desai’s record of six consecutive budgets. The budget focused on changes to the income tax structure and improving the ease of doing business in India.

The new tax regime has introduced several measures to provide tax relief to individuals and promote investment and employment. Here’s a breakdown of the key changes:

1. Tax Relief for Individuals

Revised Tax Slabs:

• Up to ₹3,00,000: No tax
• ₹3,00,001 to ₹7,00,000: 5%
• ₹7,00,001 to ₹10,00,000: 10%
• ₹10,00,001 to ₹12,00,000: 15%
• ₹12,00,001 to ₹15,00,000: 20%
• Above ₹15,00,000: 30%

These revised slabs lower the tax rates for various income levels, providing substantial relief, especially for middle-income earners.

Increased Standard Deduction:

• For salaried individuals and pensioners, the standard deduction is increased from ₹50,000 to ₹75,000. This means more of your income is exempt from tax, reducing your overall tax liability.

Enhanced Family Pension Deduction:

• The deduction for family pensions has been increased from ₹15,000 to ₹25,000, providing additional relief to those receiving family pensions.

Higher Deduction for Pension Scheme Contributions:

• Employers can now deduct up to 14% of an employee’s salary for contributions to pension schemes, up from the previous 10%. Employees will also benefit from this higher deduction.

2. Incentives to Promote Investment and Employment

Incentives for International Financial Services Centre (IFSC):

• Retail schemes and Exchange Traded Funds (ETFs) in IFSC will enjoy tax exemptions similar to those for specified funds.
• Certain incomes of the Core Settlement Guarantee Fund in IFSC will be tax-exempt.
• Finance companies in IFSC will not be subject to section 94B provisions, which limit interest deductions.
• Venture capital funds in IFSC will not need to explain the source of their funds when extending loans.
• Surcharge on income from securities by specified funds will be removed.

Reduced Tax Rate for Foreign Companies:

• The tax rate for foreign companies will be reduced from 40% to 35%, making India a more attractive destination for foreign investment.

Share Premium Tax Exemption:

• The tax on share premiums for private companies will not apply from the financial year 2024-25, simplifying tax compliance and encouraging investment.

Presumptive Taxation for Cruise Ships:

• A presumptive taxation regime for non-resident cruise ship operations will be introduced, simplifying tax calculations for these businesses.
• Income from lease rentals of cruise ships by foreign companies will be exempt if the ships are operated in India by related companies.

These changes are designed to provide financial relief, simplify tax compliance, and foster a more attractive environment for investment and employment.

Also read: Budget 2024 Live Updates: Nirmala Sitharaman Set to Present Budget with Focus on Job Creation and Tax Rate Cuts