Top 3 changes in Income Tax brought about by Interim Budget 2024

In the interim budget 2024, our honourable FM Shmt. Nirmala Sitaraman highlighted some of the achievements of BJP government over a period of 10 years, emphasising on increase in direct tax collections by 3 times and multiplying of return filers by 2.4 times inspite of no tax upto an income to Rs. 7 lakhs, increasing the thresh-hold limit in case of presumptive income and reducing the corporate tax rate to 22% in most companies and to 15% in case of certain new manufacturing units. She also highlighted the efforts of the government in improving tax-payer services and reducing corruption by initiating face-less assessment in place of jurisdiction-based assessment system. The improvement in average return processing time from 93 days to current 10 days was also brought out in the budget speech.

It was also made clear in the budget speech that no rate changes are proposed in the direct taxes.

Following changes have been introduced through the interim budget vis-a-vis Income Tax 

1. To withdraw such outstanding direct tax demands up to ₹ 25,000 pertaining to the period up to FY 2009-10 and up to ₹ 10,000 for FY 2010-11 to 2014-15 

The online processing of ITR's resulted in CPC Banglore stating old demands on the Income Tax Portal of tax-payers. These demands were found to be erroneous on various instances. The mechanism to remove the demand was not streamlined by the government and this resulted in taxpayers portal stating tax plus interest on these demands. In case a refund was due to the taxpayer, refund processing was obstructed because of these demands and in certain cases refund was adjusted with these demands. Removal of these demands is a welcome step by the government. This is expected to benefit about a crore tax-payers as per budget speech.

2. Many tax incentives expiring on 31-3-2024 have been extended to 31-3-2025

a) Sec 80IAC - Any profits and gains earned by eligible start-up, was entitled to deduction of 100% of the profits and gains derived from such business for 3 consecutive assessment years, if the start-up was incorporated after 1-4-2016 till 31-3-2024.

b) Sec 10(4D) - Specified income (on transfer of capital assets) derived by specified Alternative Investment Fund (AIF) located in any IFSC and Investment division of an offshore banking units, if the fund commenced its operation on or before 31-3-2024.

c) Sec 10(4F) - Any income earned by a Non-resident by way of royalty or interest, on account of lease of an aircraft or a ship, paid by a unit of an IFSC, is exempt under Sec 10(4F), provided IFSC has commenced its operations on or before 31-3-2024.

d) Sec 10(23FE) - Any income of a specified person in the nature of dividend, interest, specified sum received by unit holder from business trust or long-term capital gains arising from an investment made by it in India, whether in the form of debt or share capital or unit, subject to certain other conditions is exempt if the investment is made on or after the 1 April 2020 but on or before the 31-3-2024.

e) Sec 80LA -  Any income of an IFSC unit arising from the transfer of an asset being an aircraft or a ship from leasing activities was eligible for deduction under section 80LA(1A), if IFSC commence its operations on or before the 31-3-24.

f) Sec 92CA, 144C, 253 and 255 - Under all these sections government has power to issue directions till 31-3-2024.

NOTE - It is important to note that no extension of time limit specified in section 115BAB and section 115BAE. Section 115BAB grants concessional tax rate (15%) for income earned by new manufacturing domestic companies and section 115BAE grants similar concessional tax rate (15%) for new manufacturing co-operative societies, if manufacturing is to start by 31-3-2024. 

3. Changes in 206C

The Finance Act, 2023 had increased the rate of tax collected at source (‘TCS’) on Liberalised Remittance Scheme (‘LRS’) and overseas tour packages from 5% to 20% from 1-10-2023. This has been made effective retrospectively from 1-7-2023.

Also Read: 3 Important Changes in GST brought through Interim Budget 2024