10 takeaways from India’s FY25 Budget

23 Jul 2024 , 04:33 PM

Union Finance Minister Nirmala Sitharaman today presented the Budget for the financial year 2024-25. The budget aims to balance fiscal prudence with measures to support job growth and provide some sops to taxpayers.

Here are 10 key highlights of the FY25 Budget:

1. Lower Fiscal Deficit Target: The government has proposed to cut the fiscal deficit target for FY25 to 4.9% of GDP from 5.1%, thanks to the Rs 2.11 trillion dividend from the Reserve Bank of India and robust tax collection. The government also reiterated its plan to reach a deficit of below 4.5% next year.
2. Income Tax Sops: The government continued to incentivize the new income tax regime by raising the standard deduction to Rs 75,000 from Rs 50,000 and through changes in tax slabs.

Proposed Tax Slabs under New Income Tax Regime:

Slab	Tax Rate
Rs 0–3 lakh	Nil
Rs 3–7 lakh	5%
Rs 7–10 lakh	10%
Rs 10–12 lakh	15%
Rs 12–15 lakh	20%
Above Rs 15 lakh	30%

The changes in tax slabs will help salaried employees in the new tax regime save up to Rs 17,500 annually. The government also raised the deduction on family pensions to Rs 25,000 from Rs 15,000. This will provide relief to about four crore salaried individuals and pensioners.

3. Removal of Indexation Benefits on Long-Term Capital Gains: The government has proposed to remove indexation benefits on long-term capital gains on property, gold, and other unlisted assets. This move aims to ease the computation of capital gains for taxpayers and tax administration.
4. Capital Gains: The government has proposed to rationalize the way capital gains are categorized between short-term and long-term.

Proposed Changes:

• Holding Period: For all listed securities, the minimum holding period to be categorized as long-term capital gain is set at 12 months, and for all other assets, it is set at 24 months. The holding period for bonds, debentures, and gold is proposed to change to 24 months from 36 months to qualify for long-term capital gains.
• Rate: The government has proposed to raise short-term capital gains on equity shares, units of equity-oriented mutual funds, and units of business trusts to 20% from 15%. For long-term capital gains, the tax rate is proposed to be raised to 12.5% for all assets, affecting listed equity shares, units of equity-oriented funds, and business trusts which earlier attracted a 10% tax. An exemption of gains up to Rs 1.25 lakh for long-term capital gains on equity shares, units of equity-oriented funds, and business trusts is proposed, up from Rs 1 lakh earlier.

5. Abolition of Angel Tax: The government has proposed to abolish the angel tax imposed when shares of an unlisted entity are issued to investors at a price higher than their fair market value. This is expected to boost investment in startups.
6. Increased Securities Transactions Tax: STT on futures and options of securities has been increased to 0.02% and 0.1%, respectively, from 0.0125% and 0.0625% earlier, in the wake of a boom in derivatives trading.
7. Job Creation Initiatives: The government has proposed several schemes and sops to boost job creation, including:
   • Paying up to Rs 3,000 per month towards EPFO contribution of employers for each new employee for two years.
   • Offering one-month salary of up to Rs 15,000 to first-time employees, given in three installments.
   • Providing incentives to staff and employers in the manufacturing sector on their EPFO contributions, valid for the first four years of employment.
8. Customs Duties on Precious Metals: Customs duties on gold and silver have been reduced to 6% from 15%, and on platinum to 6.4% from 15.4%. The government expects this move to enhance value addition in gold and precious metal jewelry in the country.
9. Reassessment of Tax: The government has proposed to reduce the time limit for tax reassessment to five years from 10 years. It also proposed to withhold refunds for up to sixty days of assessment under section 245 and to rationalize the time limit to file an appeal to ITAT under section 253. An assessment can be reopened beyond three years from the end of the assessment year only if the escaped income is over Rs 50 lakh, up to a maximum period of five years from the end of the assessment year.
10. E-commerce Initiatives: The government will set up e-commerce export hubs in public-private partnership mode to help MSMEs and artisans sell their products in international markets.