Simplifying the tax regime for corporate industries, Union Finance Minister Nirmala Sitharaman on Tuesday proposed new tax structures for charities, foreign shipping companies, and rationalisation of capital gains in her 2024 Budget speech. She also reduced corporate tax on foreign companies from 40% to 35%. Ms. Sitharaman’s speech lasted just shy of ninety minutes.
“58% of corporate tax came from the simplified tax regime in 2022-23 and more than 2/3rd of taxpayers have used the new personal tax regime last year,” announced Ms. Sitharaman. Proposing several changes to the Income Tax Act of 1961, she said, “Two tax exemption regimes for charities are proposed to be merged into one. The 5% Tax Deducted at Source (TDS) rate on many payments is being merged into a 2% TDS rate and the 20% TDS rate on repurchase of units by mutual funds is being withdrawn.”
Corporate Tax and Capital Gains
For e-commerce operators, the TDS rate is reduced from 1% to 0.1%. Delay for payment of TDS up to the due date of filing statement has been decriminalised. Ms. Sitharaman also announced the simplification of capital gains taxation, exempting capital gains on certain financial assets up to ₹1.25 lakh per year. Short-term gains on certain financial assets will be taxed at 20% and long-term gains on all financial and non-financial assets will be taxed at 12.5%. The holding period for capital gains has been classified as one year for short term and two years for long term respectively.
“Unlisted bonds and debentures, debt mutual funds, and market-linked debentures will attract tax on capital gains irrespective of holding period,” said Ms. Sitharaman.
Boosting Foreign Investment
In a bid to bolster foreign investment in Indian start-ups, FM Sitharaman abolished angel tax for all investors. She also announced a simpler tax regime for foreign shipping companies operating domestic cruises in India. Changes include scrapping taxation for cruise ships and fixing profit and gains of cruise-ship operators to 20% of aggregate amount received. To promote diamond mining, she announced safe harbour rates for foreign mining companies selling raw diamonds in India.
This is the seventh budget speech presented by Ms. Sitharaman and her second term as Union Finance Minister. In her speech, Ms. Sitharaman thanked the people for awarding Prime Minister Narendra Modi a historic third term. This year’s budget focused on agriculture, employment, human development, energy security, manufacturing, innovation, infrastructure, and next-generation reforms.
