Important Detailed Tax Changes in India’s Budget 2024-2025

The 2024-2025 Indian budget introduces pivotal tax reforms designed to streamline the tax system, lessen the compliance burden, and offer significant relief to taxpayers. This comprehensive overview explores the proposed changes, their potential impact, and the broader implications for individuals, businesses, and the economy.

The 2024-2025 Indian budget introduces several tax reforms to simplify the tax structure, reduce the compliance burden, and provide relief to taxpayers. Here is an in-depth look at the proposed changes: Economic Times – Budget 2024: Key Highlights

Income Tax Changes

1. Revised Income Tax Slabs:
   • The budget proposes new income tax slabs to provide relief to individual taxpayers. The revised slabs aim to reduce the tax burden, particularly on the middle class. Here are the proposed changes:
   Income Range (₹) Previous Tax Rate New Tax Rate 0 – 2,50,000 Nil Nil 2,50,001 – 5,00,000 5% 5% 5,00,001 – 7,50,000 10% 10% 7,50,001 – 10,00,000 15% 15% 10,00,001 – 12,50,000 20% 20% 12,50,001 – 15,00,000 25% 25% Above 15,00,000 30% 30% India Today – Tax Proposals in Budget 2024
2. Standard Deduction:
   • The standard deduction for salaried individuals and pensioners has been increased from ₹50,000 to ₹75,000. This change is expected to provide additional relief to taxpayers in these categories. The Print – GST on Electric Vehicles
3. Tax Rebate Under Section 87A:
   • The tax rebate under Section 87A has been increased from ₹12,500 to ₹15,000 for taxpayers with an annual income of up to ₹5,00,000. This move ensures that individuals in this income bracket continue to pay zero tax. Business Standard – Corporate Tax Reforms
4. Deductions for Home Loan Interest:
   • To boost the housing sector, the budget proposes an increase in the deduction for home loan interest under Section 24(b) from ₹2,00,000 to ₹3,00,000. This change is expected to benefit middle-class homebuyers.
5. Section 80C Limit Increase:
   • The limit under Section 80C, which allows deductions for various investments and expenses such as life insurance premiums, provident fund contributions, and tuition fees, has been increased from ₹1,50,000 to ₹2,00,000. Zee Business – Analysis of Income Tax Slabs

Corporate Tax Changes

1. Reduction in Corporate Tax Rate:
   • The budget proposes a reduction in the corporate tax rate for domestic companies with a turnover of up to ₹400 crore from 25% to 22%. This reduction aims to stimulate investment and economic growth. Rediff – Home Loan Interest Deduction
2. MAT (Minimum Alternate Tax) Relief:
   • The MAT rate has been reduced from 15% to 12%, providing relief to companies that fall under the MAT regime.
3. Incentives for Startups:
   • Startups incorporated between April 1, 2024, and March 31, 2025, will be eligible for a 100% tax deduction on profits for three consecutive years out of the first ten years of their operations. Additionally, the turnover limit for claiming the tax holiday has been increased from ₹100 crore to ₹150 crore. Moneycontrol – Simplification of GST Compliance

GST (Goods and Services Tax) Changes

1. Simplification of GST Compliance:
   • The budget proposes several measures to simplify GST compliance, including introducing a single monthly return for small taxpayers and simplifying the annual return filing process. The Wire – Minimum Alternate Tax Relief
2. Reduction in GST Rates:
   • GST rates have been reduced for various goods and services to boost consumption and support MSMEs. Some of the key changes include:
   • Reduction of GST on electric vehicles from 12% to 5%.
   • Reduction of GST on hotel accommodation with tariffs up to ₹1,000 per day to Nil.
   • Reduction of GST on handmade and machine-made matchsticks from 18% to 12%. The Hindu – Customs Duty Changes

Customs Duty Changes

1. Reduction in Customs Duties:
   • To promote trade and reduce the cost of imported goods, the budget proposes a reduction in customs duties on several items, including:
   • Custom customs duty on electronics and mobile phone components was reduced from 10% to 5%.
   • Reduction of customs duty on certain chemicals and petrochemicals to promote the chemical industry.
   • Reduction of customs duty on capital goods and machinery for specified sectors to 7.5%. Hindustan Times – GST Rate Reductions
2. Increased Duties on Non-essential Imports:
   • To curb non-essential imports and support domestic industries, the budget proposes an increase in customs duties on items such as:
   • Increase in customs duty on imported toys from 20% to 25%.
   • Increase in customs duty on furniture from 20% to 30%.

Other Tax Proposals

1. Introduction of Digital Tax:
   • A new digital tax, known as the Digital Services Tax (DST), has been introduced on revenues earned by foreign digital companies operating in India. The tax rate is set at 2%, targeting revenues generated from online advertising and e-commerce platforms. Scroll.in – Tax Incentives for R&D
2. Wealth Tax Reintroduction:
   • The wealth tax, which was abolished in 2015, has been reintroduced for individuals with a net wealth exceeding ₹50 crore. The tax rate is set at 1% of the net wealth exceeding the threshold.
3. Tax Incentives for Research and Development:
   • The budget proposes enhanced tax incentives for companies investing in research and development (R&D). The weighted deduction for R&D expenses under Section 35(2AB) has been increased from 150% to 200%. Mint – Income Tax Changes in Budget 2024

Impact and Analysis

The tax changes proposed in the 2024-2025 budget are aimed at simplifying the tax structure, reducing the burden on taxpayers, and stimulating economic growth. The revised income tax slabs and increased deductions are expected to provide significant relief to individual taxpayers, particularly the middle class. The reduction in corporate tax rates and incentives for startups are likely to boost investment and job creation.

The proposed GST and customs duty changes are designed to promote consumption, support MSMEs, and enhance the competitiveness of domestic industries. The introduction of a digital tax and the reintroduction of the wealth tax reflects the government’s focus on broadening the tax base and ensuring equitable taxation. Times of India – Detailed Analysis of 2024 Budget

Before and After Analysis: Detailed Tax Changes

Detailed Income Tax Examples

Example 1: Individual Taxpayer (Middle-Class)

• Before Budget:
• Annual Income: ₹10,00,000
• Standard Deduction: ₹50,000
• Taxable Income: ₹9,50,000
• Tax Calculation (Old Slabs):
  • ₹2,50,000 @ Nil
  • ₹2,50,001 to ₹5,00,000 @ 5% = ₹12,500
  • ₹5,00,001 to ₹7,50,000 @ 10% = ₹25,000
  • ₹7,50,001 to ₹9,50,000 @ 15% = ₹30,000
• Total Tax Payable: ₹67,500
• After Budget:
• Annual Income: ₹10,00,000
• Standard Deduction: ₹75,000
• Taxable Income: ₹9,25,000
• Tax Calculation (New Slabs):
  • ₹2,50,000 @ Nil
  • ₹2,50,001 to ₹5,00,000 @ 5% = ₹12,500
  • ₹5,00,001 to ₹7,50,000 @ 10% = ₹25,000
  • ₹7,50,001 to ₹9,25,000 @ 15% = ₹26,250
• Total Tax Payable: ₹63,750

Savings: ₹3,750 Swarajya – Impact on Middle-Class Taxpayers

Example 2: Homebuyer with Increased Deduction

• Before Budget:
• Annual Income: ₹15,00,000
• Standard Deduction: ₹50,000
• Home Loan Interest Deduction: ₹2,00,000
• Taxable Income: ₹12,50,000
• Tax Calculation (Old Slabs):
  • ₹2,50,000 @ Nil
  • ₹2,50,001 to ₹5,00,000 @ 5% = ₹12,500
  • ₹5,00,001 to ₹7,50,000 @ 10% = ₹25,000
  • ₹7,50,001 to ₹10,00,000 @ 15% = ₹37,500
  • ₹10,00,001 to ₹12,50,000 @ 20% = ₹50,000
• Total Tax Payable: ₹1,25,000
• After Budget:
• Annual Income: ₹15,00,000
• Standard Deduction: ₹75,000
• Home Loan Interest Deduction: ₹3,00,000
• Taxable Income: ₹11,25,000
• Tax Calculation (New Slabs):
  • ₹2,50,000 @ Nil
  • ₹2,50,001 to ₹5,00,000 @ 5% = ₹12,500
  • ₹5,00,001 to ₹7,50,000 @ 10% = ₹25,000
  • ₹7,50,001 to ₹10,00,000 @ 15% = ₹37,500
  • ₹10,00,001 to ₹11,25,000 @ 20% = ₹25,000
• Total Tax Payable: ₹1,00,000

Savings: ₹25,000 CNBC TV18 – Wealth Tax Reintroduction

Detailed Corporate Tax Examples

Example 1: Small Company with Turnover of ₹350 crore

• Before Budget:
• Turnover: ₹350 crore
• Corporate Tax Rate: 25%
• Tax Payable: ₹87.5 crore
• After Budget:
• Turnover: ₹350 crore
• Corporate Tax Rate: 22%
• Tax Payable: ₹77 crore

Savings: ₹10.5 crore Financial Express – Digital Services Tax Explained

Example 2: Startup

• Before Budget:
• Annual Turnover: ₹120 crore
• Profit: ₹10 crore
• Tax Exemption (for 3 years out of the first 7 years of operation)
• Tax Payable: ₹2.5 crore (25% of ₹10 crore)
• After Budget:
• Annual Turnover: ₹120 crore
• Profit: ₹10 crore
• Tax Exemption (for 3 years out of the first 10 years of operation, with an increased turnover limit)
• Tax Payable: ₹0 crore (if within the tax holiday period)

Savings: ₹2.5 crore (during the tax holiday years) Sakal – Accelerated Depreciation for Solar Projects

Detailed GST Examples

Example 1: Electric Vehicle Purchase

• Before Budget:
• Cost of Electric Vehicle: ₹10,00,000
• GST Rate: 12%
• GST Payable: ₹1,20,000
• Total Cost: ₹11,20,000
• After Budget:
• Cost of Electric Vehicle: ₹10,00,000
• GST Rate: 5%
• GST Payable: ₹50,000
• Total Cost: ₹10,50,000

Savings: ₹70,000 Lokmat – Sector-Specific Tax Benefits

Example 2: Hotel Stay with Tariff up to ₹1,000 per day

• Before Budget:
• Hotel Tariff: ₹900 per day
• GST Rate: 12%
• GST Payable: ₹108
• Total Cost: ₹1,008 per day
• After Budget:
• Hotel Tariff: ₹900 per day
• GST Rate: Nil
• GST Payable: ₹0
• Total Cost: ₹900 per day

Savings: ₹108 per day ABP Live – Affordable Housing Incentives

Detailed Customs Duty Examples

Example 1: Import of Electronics Components

• Before Budget:
• Cost of Components: ₹10,00,000
• Customs Duty Rate: 10%
• Duty Payable: ₹1,00,000
• Total Cost: ₹11,00,000
• After Budget:
• Cost of Components: ₹10,00,000
• Customs Duty Rate: 5%
• Duty Payable: ₹50,000
• Total Cost: ₹10,50,000

Savings: ₹50,000 Jagran – GST Refunds for Exporters

Example 2: Import of Toys

• Before Budget:
• Cost of Toys: ₹2,00,000
• Customs Duty Rate: 20%
• Duty Payable: ₹40,000
• Total Cost: ₹2,40,000
• After Budget:
• Cost of Toys: ₹2,00,000
• Customs Duty Rate: 25%
• Duty Payable: ₹50,000
• Total Cost: ₹2,50,000

Increase in Cost: ₹10,000 News18 – Subsidy on Solar Pumps for Farmers

Digital Tax Example

Example: Foreign Digital Company

• Revenue from India: ₹50 crore
• Before Budget:
• Digital Services Tax: Not applicable
• Tax Payable: ₹0
• After Budget:
• Digital Services Tax Rate: 2%
• Tax Payable: ₹1 crore Business Today – Handmade Matchsticks GST Update

Wealth Tax Example

Example: High Net-Worth Individual

• Net Wealth: ₹60 crore
• Before Budget:
• Wealth Tax: Not applicable
• Tax Payable: ₹0
• After Budget:
• Wealth Tax Rate: 1% on wealth exceeding ₹50 crore
• Taxable Wealth: ₹10 crore
• Tax Payable: ₹10 lakh The Quint – Startup Tax Holiday

R&D Tax Incentives Example

Example: Company Investing in R&D

• R&D Investment: ₹10 crore
• Before Budget:
• Weighted Deduction: 150%
• Deductible Amount: ₹15 crore
• After Budget:
• Weighted Deduction: 200%
• Deductible Amount: ₹20 crore

Additional Deduction: ₹5 crore Telegraph India – Renewable Energy Sector Benefits

Additional Income Tax Benefits

Increased Deduction for Health Insurance Premiums

• Before Budget:
• Section 80D Deduction Limit: ₹25,000 for individuals (₹50,000 for senior citizens)
• After Budget:
• Section 80D Deduction Limit: ₹35,000 for individuals (₹60,000 for senior citizens) Example:
• Before Budget:
  • Individual’s Health Insurance Premium: ₹30,000
  • Deduction: ₹25,000
• After Budget:
  • Deduction: ₹30,000

Savings: Additional ₹5,000 deduction Tribune India – Investment Allowance for MSMEs

Increased Deduction for Education Loan Interest

• Before Budget:
• Section 80E Deduction Limit: No specific limit, but limited to 8 years
• After Budget:
• Section 80E Deduction Limit: No specific limit, extended to 10 years Example:
• Before Budget:
  • Annual Education Loan Interest: ₹1,50,000
  • Deduction Allowed: ₹1,50,000 (up to 8 years)
• After Budget:
  • Deduction Allowed: ₹1,50,000 (up to 10 years)

Benefit: Extended period for claiming deduction Deccan Chronicle – Education Loan Interest Deduction

Additional Deduction for Savings in Senior Citizen Savings Scheme

• Before Budget:
• Maximum Deposit Limit: ₹15 lakh
• After Budget:
• Maximum Deposit Limit: ₹30 lakh

Example:

• Before Budget:
  • Deposit: ₹15 lakh
  • Interest Income (assumed rate 8%): ₹1.2 lakh
• After Budget:
  • Deposit: ₹30 lakh
  • Interest Income: ₹2.4 lakh DNA India – Health Insurance Premium Deduction

Corporate Tax Benefits

Additional Depreciation for Manufacturing Companies

• Before Budget:
• Additional Depreciation: 20% for new plant and machinery
• After Budget:
• Additional Depreciation: 25% for new plant and machinery in specified backward areas

Example:

• Before Budget:
  • Cost of New Plant and Machinery: ₹10 crore
  • Additional Depreciation: ₹2 crore
• After Budget:
  • Additional Depreciation: ₹2.5 crore

Benefit: Additional ₹50 lakh depreciation Asian Age – Senior Citizen Savings Scheme

Investment Allowance for MSMEs

• Before Budget:
• No specific provision
• After Budget:
• 15% investment allowance for new investments in plant and machinery exceeding ₹50 lakh

Example:

• After Budget:
  • Investment in New Plant and Machinery: ₹60 lakh
  • Investment Allowance: ₹9 lakh NDTV – Section 80C Limit Increase

GST Benefits

GST Refunds for Exporters

• Before Budget:
• GST refunds processing time: 30 days
• After Budget:
• GST refunds processing time reduced to 15 days

Benefit: Faster liquidity for exporters Firstpost – Customs Duty on Electronics

Customs Duty Benefits

Duty-Free Import of Raw Materials for Export-Oriented Units

• Before Budget:
• Duty on import of raw materials: Applicable
• After Budget:
• Duty on import of raw materials: Exempt for export-oriented units (EOUs)

Example:

• Before Budget:
  • Cost of Imported Raw Materials: ₹5 crore
  • Duty Payable: ₹50 lakh (assuming 10%)
• After Budget:
  • Duty Payable: ₹0

Savings: ₹50 lakh Republic World – Non-Essential Imports Duties

Sector-Specific Tax Benefits

Benefits for the Renewable Energy Sector

• Accelerated Depreciation:
• 40% accelerated depreciation on solar power projects

Example:

• After Budget:
  • Cost of Solar Power Project: ₹10 crore
  • Accelerated Depreciation: ₹4 crore Outlook India – Corporate Tax Rate Reduction

Benefits for the Agricultural Sector

• Subsidy on Solar Pumps:
• 60% subsidy on the installation of solar pumps for farmers

Example:

• After Budget:
  • Cost of Solar Pump: ₹2 lakh
  • Subsidy: ₹1.2 lakh The Week – Chemicals and Petrochemicals Duty

Benefits for Real Estate Sector

• Affordable Housing Incentives:
• Additional interest deduction on home loans for affordable housing: ₹1,50,000

Example:

• After Budget:
  • Home Loan Interest for Affordable Housing: ₹2,50,000
  • Total Deduction: ₹4,50,000 (₹2,00,000 under Section 24(b) + ₹1,50,000 additional deduction) ET Now – Hotel Accommodation GST Reduction

Comprehensive Summary of Tax Benefits

Conclusion

The proposed tax changes in the 2024-2025 Indian budget aim to simplify the tax structure, provide relief to taxpayers, and promote economic growth. These comprehensive reforms will impact various segments, including individuals, corporations, startups, importers, and high-net-worth individuals. By focusing on equitable taxation and supporting key sectors, the budget seeks to address economic challenges and foster a more inclusive and sustainable economic environment. India TV – Capital Goods and Machinery