01/02/2025
Vision and Reforms for a Developed India
• The government aims to simplify taxation as part of its broader vision for Vikasith Bharat (Developed India).
• A new Income Tax Bill will reduce the complexity of current laws, featuring clearer and more concise provisions, cutting both chapters and words by half.
• Focus areas include good governance, reduced litigation, tax certainty, and responsive policymaking, guided by the principle of sabka saath, sabka vikas.
Tax Rate Structure Revisions
1. No Tax on Income Up to ₹12 Lakh
• Individuals earning up to ₹12 lakh annually (₹1 lakh per month) will pay no income tax under the new tax regime.
• For salaried taxpayers, due to the ₹75,000 standard deduction, this threshold is ₹12.75 lakh.
2. Revised Tax Slabs and Rates
• 0 – ₹4 lakh: 0%
• ₹4 – ₹8 lakh: 5%
• ₹8 – ₹12 lakh: 10%
• ₹12 – ₹16 lakh: 15%
• ₹16 – ₹20 lakh: 20%
• ₹20 – ₹24 lakh: 25%
• Above ₹24 lakh: 30%
3. Tax Rebates and Benefits
• Taxpayers earning up to ₹12 lakh (excluding special income like capital gains) will receive a rebate, resulting in zero tax payable.
• Examples of benefits from the new regime:
• Income ₹12 lakh: ₹80,000 tax benefit (100% reduction from existing rates).
• Income ₹18 lakh: ₹70,000 tax benefit (30% reduction).
• Income ₹25 lakh: ₹1,10,000 tax benefit (25% reduction).
• These reforms aim to increase disposable income, promoting household consumption, savings, and investments.
4. Revenue Impact
• An estimated ₹1 lakh crore in direct taxes and ₹2,600 crore in indirect taxes will be foregone as a result of these proposals.
Other Major Tax Proposals
1. TDS and TCS Reforms
• Reduction in the number of TDS rates and thresholds for simplification.
• Increase in tax deduction limits:
• Senior citizens’ interest deduction limit raised from ₹50,000 to ₹1 lakh.
• TDS threshold for rent payments increased from ₹2.4 lakh to ₹6 lakh annually.
• TCS threshold for remittances under RBI’s Liberalized Remittance Scheme (LRS) increased from ₹7 lakh to ₹10 lakh.
• TCS exemption for educational remittances funded by loans from specified financial institutions.
• Higher TDS provisions to apply only to non-PAN holders.
2. Voluntary Compliance and Updated Returns
• Time limit for filing updated returns extended from 2 to 4 years.
• The government highlights the success of the updated return facility introduced in 2022, with nearly 90 lakh taxpayers voluntarily updating their incomes.
3. Charitable Trusts and Compliance Relief
• Registration period for small charitable trusts extended from 5 to 10 years.
• Provisions to prevent disproportionate penalties for minor compliance errors.
4. Property and Transfer Pricing Reforms
• Taxpayers can now claim the benefit of two self-occupied properties without conditions.
• Introduction of a 3-year block period scheme for determining arm’s length pricing of international transactions.
• Expansion of safe harbor rules to reduce litigation and provide tax certainty in international taxation.
5. Senior Citizen Benefits
• Exemption for withdrawals from National Savings Scheme (NSS) accounts with no interest accrual after August 29, 2024.
• Extension of similar benefits to NPS (Vatsanya) accounts.
6. Digitalization and Dispute Resolution
• Implementation of paperless, digital processes for tax orders and appeals.
• The Vivaat Se Vishwaas dispute resolution scheme has seen 33,000 taxpayers settle disputes.
Measures for Investment and Employment Promotion
1. Presumptive Taxation for Non-Residents
• A new presumptive taxation scheme for non-residents providing services to electronics manufacturing facilities in India.
2. Safe Harbor for Electronics Manufacturers
• Tax certainty for non-residents storing components for supply to electronics manufacturers.
3. Tonnage Tax Extension
• Extension of the tonnage tax scheme to inland vessels registered under the Indian Vessels Act 2021 to promote inland water transport.
4. Startup Ecosystem Support
• Extension of startup benefits to companies incorporated before April 1, 2030, by an additional five years.
5. IFSC Investment Incentives
• Specific benefits proposed for ship leasing units, insurance offices, and treasury operations in the International Financial Services Centre (IFSC).
