Income Tax Budget 2024 Highlights: No change in rates but some taxpayers to benefit from direct tax demand withdrawal

Akhilesh Ranjan – Price Waterhouse and former member of Central Board of Direct Taxes said, “The increase in personal income tax collections (the RE for FY24 being about 13% higher than the BE, and the BE for FY25 pitched at an even higher increase of about 28% over that of FY24) is notable and indicates a robust and increasingly compliance-based tax system, generating a direct tax to GDP ratio of well over 6%.

Chief Economic Adviser (CEA) V Anantha Nageswaran said the overall tax revenues are expected to grow at 12.5% in the current fiscal. This growth is underscored by a tax buoyancy of 1.1%, highlighting the resilience of the economy.

He pointed out the absence of tax rate increases in both the current and preceding fiscal years and said that the government is focusing on broadening the tax base to meet revenue targets while implementing measures to simplify the tax payment process for the citizens.

Read full story here

Sonu Iyer, Partner, People Advisory Services (Tax), EY India, said, “Vote on Account budget resisting temptations to propose any populist tax concessions. It takes courage to stay firm on the path of fiscal prudence. Very impressive to see focus on poor, women, youth and farmers for inclusive growth as India continues to aim for higher GDP as also Governance, Development and Performance. Welcome initiative to withdraw 50+ years petty and unverified tax demands benefiting small taxpayers. Kudos to the FM for a job well done.”

Saurabh Agarwal, Tax Partner, EY India said, “The latest budget proposal refines the Input Service Distributor (ISD) scheme, aligning it with Circular 199. Now, ITC distribution through ISD is limited to services directly benefitting distinct branches in different states/GST registrations. This clarifies ambiguities and eases compliance for businesses, as it doesn’t encompass all received services.” 

“However, careful analysis is crucial to determine if services fall under the “distinct person” rule for ISD or constitute a separate supply in itself. Importantly, this change applies prospectively, protecting past cross-charges from disputes.  While positive, a case-by-case approach is essential to navigate the “distinct person” rule effectively to avoid future disputes,” he added.

Surabhi Marwah, Tax Partner and Private Client Services Co-Leader, EY India said, “Despite being a budget with minimal amendments (in keeping with the tradition for Vote on Account budgets), the extension of time-limits from 31 March ,2024 to 31 March ,2025 for the date of incorporation for eligible startups to claim a profit linked tax holiday provides a welcome relief to the startup sector, indicating the government’s continued support and faith. These measures are certainly going to incentivize the start-up eco-system by providing ease of doing business and increasing free cashflows available for their growth and expansion.”

Dinesh Khara, Chairman, SBI said, ” The heartening news is that the anticipated tax buoyancy in FY24 excluding the outlier pandemic year is the highest in 7 years. This apart, the budget has laid out reinforced architecture of Big possibilities, creating an all-encompassing action-oriented roadmap to embark upon an arduous yet rewarding journey for each and every Indian.”

Sujit Bangar, Founder, Taxbuddy.com said, “The most comforting announcement is about the scrapping of petty income tax disputed demands outstanding for many years. This announcement is in line with the government’s earlier initiatives to reduce litigation.”

Nishit Parikh- Partner Direct Taxation, Sudit K. Parekh & Co. LLP said, “Tax receipts for FY 25 pegged to ₹26.02 lakh crore. This is in line with government’s vision on increasing tax base and boosting tax revenue. This is also visible from the increase in tax filers.”

Sanjay Chhabria, Director, Indirect Tax at Nexdigm said, “Budget 2024 has highlighted a positive impact of GST transition on the industry, by doubling the tax base and two-fold increase in the average GST collection. The expectations of rationalisation of GST rates seem to be a big miss as the FM announced no change in the tax rates.”

In her Budget announcements on February 1, Finance Minister Nirmala Sitharaman, in line with expectations for an interim Budget, made no alterations to the National Pension System (NPS). As previously indicated, this Budget served as a vote on account, and given the electoral context, major changes were not anticipated.

As this was a ‘vote on account,’ Finance Minister Nirmala Sitharaman proposed to retain the same rates for direct and indirect taxes, including import duties. However, she did have something for startups and investments made by sovereign wealth or pension funds. Here’s a look at modifications made in personal finance across the past five budgets.

For every rupee in the government coffer, 63 paise will come from direct and indirect taxes, 28 paise from borrowings and other liabilities, 7 paise from nontax revenue like disinvestment and 1 paise from nondebt capital receipts, according to the interim Budget 202425 documents.

Finance Minister Nirmala Sitharaman on Thursday, February 1, stated that the average time for getting income tax refund has witnessed a decrease from 93 days in 2013-14 to 10 days in the current financial year. This achievement reflects a shift in the digital landscape, Sitharaman said while making Budget 2024 announcements.

The government’s gross tax revenue is projected to grow 11.46% to ₹38.31 lakh crore in the next fiscal, buoyed by 11.6% growth in GST collections. Goods and Services Tax (GST) collection in 202425 is estimated to rise to ₹10.68 lakh crore, an increase of ₹1.1 lakh crore or 11.6%.

The government has pegged nontax revenue collection estimates from the communications sector at about ₹1.20 lakh crore for 202425 and expects to exceed the budget estimates for the current fiscal. As per the interim budget document, the government has revised the revenue estimate from other communication services’ for the current fiscal to ₹93,541.01 crore from the earlier projection of ₹89,469.17 crore mentioned in the previous budget.

Murthy Nagarajan, Head-Fixed Income, Tata Asset Management said, “The total non-tax revenue has been budgeted at ₹1.53 lakh crore same as last year. The numbers look realistic as the assumption are realistic. The Finance minister stated they want to get fiscal deficit below 4.5 % in 2025-26. This is anti-inflationary budget in an election year as the fiscal deficit is reduced to 5.1%.”

Vetri Subramaniam, Chief Investment Officer, UTI AMC said, “This is a judicious interim budget. The tax estimates appear reasonable and the stability in tax provisions is welcome. The government has done the heavy lifting during the post pandemic period and is now passing the baton to the other players in the economy.”

In her address presenting the interim Budget, Finance Minister Nirmala Sitharaman opted to leave the standard deduction untouched at ₹50,000. (Read more)

Balachander Sekhar, Co-founder of RenewBuy said, “The Finance Minister’s choice to keep personal income tax slabs and rates unchanged in the Interim Budget is a cautious move. Given ongoing global challenges, it’s crucial to balance fiscal control with necessary spending on capital projects to support economic growth.”

Akhilesh Ranjan – Price Waterhouse and former member of Central Board of Direct Taxes said, “The increase in personal income tax collections (the RE for FY24 being about 13% higher than the BE, and the BE for FY25 pitched at an even higher increase of about 28% over that of FY24) is notable and indicates a robust and increasingly compliance-based tax system, generating a direct tax to GDP ratio of well over 6%.

In a crucial move during the budget announcement for the financial year 2024, Finance Minister Nirmala Sitharaman refrained from making changes to the existing income tax regime. However, certain tax benefits were announced. (Read more)

While the tax rates have been left unchanged in the interim budget, income tax benefits have been extended by a year in three key areas: startups, Indian units of foreign banks in GIFT City (Gandhinagar, Gujarat) and sovereign funds and foreign pension funds. (Read more)

Manish Mishra, Partner, JSA Advocates and Solicitors said, “The budget stressed on the facilitation measures taken for speedier import clearances leading to reduction in logistical costs. One can expect that the government will continue to usher in the reforms and facilitation measures and look forward to the next budget scheduled to be tabled in the Parliament in July after the next elections.”

Archit Gupta, Founder and CEO, ClearTax said, “Although largely in line with the historical interim budgets, FM’s announcement of zero changes in direct and indirect taxes, including import duties, for the FY 2024-25 has surprised the industry. The FM has made it clear that her decision was in line with the convention of the Interim Budgets.”

The GST tax base has more than doubled, and monthly gross GST collections have nearly doubled, reaching ₹1.66 lakh crore this year.

The integration of India’s previously fragmented indirect tax system through GST has alleviated the compliance burden for trade and industry. Recognizing its advantages, 94% of industry leaders, as per a recent survey by a prominent consulting firm, express a positive outlook on the shift to GST, said FM Sitharaman. A significant 80% note enhanced supply chain efficiency due to the removal of tax arbitrage and octroi, leading to the dismantling of check posts at state and city borders, she said.

Finance Minister Nirmala Sitharaman on Thursday, February 1, proposed the withdrawal of all direct tax demands up to ₹25,000 for the financial year 2009-10. Additionally, demands up to ₹10,000 pertaining to the financial years 2010-11 through 2014-15 are set to be withdrawn, FM said while making Budget 2024 announcements. Read here to know more

Over the last ten years, the direct tax collections have more than trebled and the return filers swelled to 2.4 times. I would like to assure the taxpayers that their contributions have been used wisely for the development of the country and the welfare of its people. I appreciate the tax payers for their support, said FM Sitharaman.

Finance Minister Nirmala Sitharaman, during her Budget 2024 speech, revealed a significant reduction in average refund processing time, decreasing from 93 days in 2013-2014 to a mere 10 days in the past year.

During her Union Budget 2024 speech, Finance Minister Nirmala Sitharaman expressed appreciation for income taxpayers, acknowledging that the modifications introduced in the new income tax regime last year have proven advantageous for taxpayers.