The Institute of Chartered Accountants of India (ICAI) welcomes the Budget that focuses on employment, skilling, MSMEs sector and Middle Class. Simplifying taxes, improving taxpayer services, providing tax certainty, and reducing litigation are the four cornerstones of the tax proposals in this budget.
CA. Ranjeet Kumar Agarwal, President of ICAI, said, “the proposal outlined by the finance minister, such as simplifying the FDI rules, facilitating term loans for MSMEs, and abolishing angel tax will boost domestic and startup industries in the country. The budget's focus on increasing the participation of women in the workforce is also a very welcome measure. Initiatives aimed at skilling and upskilling women, as well as providing support for women entrepreneurs, are expected to enhance economic growth and social development.”
Further proposal aimed at reviewing the Income-tax Act, 1961 is in the overall interest of taxpayers provide tax certainty to the taxpayers is the need of the hour. The extension of C-PACE services for voluntary LLP closures will streamline the filings and accelerate the closure process.
President, ICAI, added “We also welcome the recent reforms aimed at enhancing the efficiency and effectiveness of the Insolvency and Bankruptcy Code (IBC) and strengthening tribunals to facilitate speedy resolution. The moves announced are towards achieving the objective of IBC in India which is one of the biggest economic reforms. Also, we appreciate the announcement with regard to the launch of new integrated technology platform for IBC cases which will not only ensure consistency, transparency, accessibility but also will cater to the diverse needs of all Stakeholders including Insolvency Professionals, creditors and debtors.”
Some significant proposals of the Union Budget 2024-25 are given below:
Simplified Taxation Schemes: The budget highlights the increasing preference among corporates and individuals for special simplified schemes in corporate and personal taxation. These schemes offer reduced tax rates on total income computed sans deductions and incentives.
A Comprehensive review of the Income-tax Act, 1961: Aimed at reducing disputes and litigation to provide tax certainty to the taxpayers, which is crucial. Additionally, the reduction of TDS rates align with the goal of using TDS primarily as an audit trail rather than a revenue-generating tool. The merger of first regime u/s 10(23C) and second regime u/s 11 to 13 for charitable trust will pave way for simplifying the overall tax system for trusts.
Rationalisation of Capital Gains Taxation: Rationalisation of the Capital Gains Taxation regime include reduction in tax rate on LTCG u/s 112 from 20% to 12.5% simultaneously with removal of indexation benefit; and increase in tax rate of long-term capital gains (LTCG) in respect of listed financial assets taxable u/s 112A from 10% to 12.5% along with increase in exemption from Rs.1 lakh to Rs. 1.25 lakhs. The tax rate on short-term capital gains (STCG) on certain financial assets will increase from 15% to 20%, while other gains will be subject to the applicable tax rate. The period of holding for classifying a capital asset as long-term or short-term is being reduced from 36 months to 24 months for all unlisted financial assets and all non-financial assets. Income received on buyback of shares will now be taxed akin to dividend in the hands of the recipient.
Digitalization of Taxpayer Services: India ranks high in digitalisation of taxpayer services and this index is expected to improve further with the announcement of digitalization of the remaining services of Customs and Income Tax including rectification and order giving effect to appellate orders over the next two years.
Reducing Litigation and Appeals: The Bill also focuses on reducing litigation and appeals, which is the pressing priority to dispose the huge backlog, increasing in threshold limit for department appeals.
Personal Taxation Relief: The budget also focuses on personal taxation, with an increase in the standard deduction and deduction for family pension and rationalization of tax slabs, providing some relief to the middle class—a significant focus area of this budget.
Block assessment scheme reintroduced for search cases - A significant change in the procedural tax regime is the reintroduction of block assessment scheme for search cases.
International Taxation - On the international taxation front, to promote foreign investment, corporate tax rate for foreign companies is being reduced from 40% to 35%, angel tax is being withdrawn as also equalization levy of 2% on e-commerce supply or services. Moreover, the scope of safe harbour rules is being expanded to aid in reducing litigation and provide certainty in international taxation.
Pre-budget suggestions of ICAI - ICAI is happy to note the consideration of its Pre-budget suggestions in the Finance Bill. Suggestions relating to decriminalisation of late payment of TDS, on payment being made before the certain time prescribed, increasing the threshold limit for allowable remuneration to working partner, increasing the standard deduction for salaried employees and increasing the threshold exemption for taxation of long-term capital gains on transfer of STT paid equity shares. ICAI had suggested that the assessee may be given an option to withdraw the appeal by paying the entire tax due; the entire interest and penalty be waived. It was suggested that this measure would go a long way in bringing down litigation. The Vivaad Se Viswas 2024 is a proposal in this direction. ICAI also lauds the proposal to provide a standard operating procedure for TDS defaults and rationalize the compounding guidelines for such defaults.
Indirect Tax Proposals - The customs duty rate changes proposed in the Union Budget 2024 are designed to boost exports, enhance local value addition and domestic manufacturing, encouraging growth and sustainability. The GST proposals in the Finance (No. 2) Bill, 2024 aim to give effect to the recommendations made in the 53rd GST Council Meeting. Empowering the Government to regularize non-levy or short levy of tax due to any general practice prevalent in trade is a progressive amendment which will facilitate taxpayers. The new dispensation of having a common time limit for issuance of demand notices and orders in fraud and non-fraud cases in respect of demands from the financial year 2024-25 onwards is a significant move to reduce disputes and bring clarity.
The Union Budget 2024-25 is thus forward looking with significant initiatives aimed at boosting economic growth, fostering innovation, and improving the ease of doing business in India.
About ICAI
The Institute of Chartered Accountants of India (ICAI) is a statutory body set up by an Act of Parliament under the Chartered Accountants Act, 1949 for the regulation and development of the profession of Chartered Accountancy in India. The Institute functions under the administrative supervision of the Ministry of Corporate Affairs, Government of India. With more than 9.85 lakh students and over 4 lakh members, today ICAI is the largest professional accountancy body in the world. ICAI has a wide network of 5 Regional Councils and 176 Branches within India and a global presence with 50 Overseas Chapters and 31 Representative Offices spanning 81 cities across 47 Countries worldwide.