India's Finance Minister presented the India Union Budget 2024 to Parliament on 23 July 2024, the first full budget of the new government. The Budget Speech set out a package of direct tax changes aimed at investment and simplification, including the abolition of the so-called angel tax for all classes of investors and a cut in the corporate tax rate on foreign companies from 40 to 35 per cent.
Corporate INTL Newsroom · Tax
India Union Budget 2024 Abolishes Angel Tax and Cuts Foreign Company Rate
By The Corporate INTL Newsroom · 24 July 2024
The speech also announced a comprehensive review of the Income-tax Act, 1961, intended to make the law concise and easier to understand, which the government proposes to complete within six months.
Key tax measures
- Angel tax: abolished for all classes of investors, to support the start-up ecosystem.
- Foreign companies: corporate tax rate reduced from 40 to 35 per cent to attract foreign capital.
- Capital gains: short-term gains on certain financial assets taxed at 20 per cent; long-term gains on all financial and non-financial assets taxed at 12.5 per cent, with the annual exemption on certain financial assets raised from ₹1 lakh to ₹1.25 lakh.
- Holding periods: listed financial assets held for more than a year are long term, while unlisted financial assets and non-financial assets must be held for at least two years.
- Equalisation levy: the 2 per cent levy on e-commerce supplies will no longer apply on or after 1 August 2024.
Disputes and compliance
The government proposed a Vivad se Vishwas Scheme, 2024 to settle pending income tax appeals and raised the monetary thresholds for government appeals to the Tax Tribunals, High Courts and Supreme Court to ₹60 lakh, ₹2 crore and ₹5 crore. Reassessment beyond three years will be possible only where escaped income is ₹50 lakh or more, up to five years from the end of the assessment year. According to the Memorandum to the Finance (No. 2) Bill, late payment of tax deducted at source will be decriminalised where payment is made before the time for filing the relevant statement.
What it means for business
For inbound investors, the India Union Budget 2024 lowers the headline rate for branches of foreign companies and removes a long-running source of dispute over share issues by unlisted companies. Investors holding Indian securities will need to model the new capital gains rates and holding periods. The proposals take effect through the Finance (No. 2) Bill, 2024, which must now pass Parliament.
Sources
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