Budget 2024 - An Analysis

The Interim Budget 2024 has been announced by the Finance Minister. The year 2024 is special as the general elections are going to take place and a new set of ministers are going to be appointed. Today, India is a fast-growing economy with modern technology fully equipped. India happens to be a preferred destination of investment and now starts to ease business. This budget ("Sabha Saath Sabka Vikas") is only an interim budget where only a vote on account is delivered by the finance minister. Here only a brief summary is given, and when the new government comes, a full budget will be delivered.

Let us analyze key changes in direct tax based on the Income-tax Act 1961 (''the act'') and indirect tax based on the GST Act 1961 in brief.

• There is no change in slab rates of income tax.
• To minimize litigation and maximize compliance, faceless appeals are going to be extended until the dispute resolution panel and for other authorities, such as the income tax appeal tribunal, until March 31, 2024. Even minor demands up to Rs10,000 are going to be waived off.
• The current government places a lot of emphasis on giving tax benefits to start-ups, international financial service centers (gift cities), and alternative investment funds. This is done to encourage angel investors and foreign institutional investors to invest in the above-mentioned areas. Let us analyze it in four snippets.

1. 80IAC deduction is available for 3 out of 7 consecutive years for a block period until March 31, 2024. The same is now extended until March 31, 2025.
2. Income from a unit of IFSC is exempt for a tax period of 10 out of 15 financial years, provided the unit commenced business operations before March 31, 2024. Now the same is extended up to March 31, 2025. The same applies to the royalty-leasing income of aircraft.
3. Income from securitization trusts or transfers of capital assets on a recognized stock exchange in any IFSC attributable to the investment division of the offshore banking unit is exempt from tax, provided the investment division has commenced its operation on or before March 31, 2024. Now extended up to March 31, 2025.
4. Investment income from the notified sovereign welfare fund is exempt from tax if it is made between April 1, 2020, and March 31, 2024. Now the same is extended until March 31, 2025.

• Tax collection at source (''TCS'') rates for overseas tour packages and the liberalized remittance scheme were proposed to be increased to 20% for an amount exceeding Rs 7 lakhs from July 1st, 2023. The same got deferred to October 1, 2023, but no effect came. Now the change is going to take place, as the same is going to be incorporated into the Act.
• A penalty of INR 1 lakh for each unregistered piece of machinery (notified under Section 148, viz., tobacco manufacturing, etc.) is proposed to be implemented for not complying with the special procedures mandated. It has also been proposed that if the imposed penalty has been paid and machinery is registered within 3 days from the date of the penalty order, the machinery shall not be confiscated.
• It has been proposed to include invoices where GST is paid on reverse charge mechanism supplies on behalf of distinct persons within the scope of the input service distributor. Also, the ISD shall distribute the input tax credits in accordance with the prescribed rules.

Conclusion

• No discussion was made on OECD (organization) pillar 2, although a lot of developed nations have implemented the same. The same announcement is expected to be made in the new government budget.
• 115BAB (a new scheme for manufacturing companies) and 115BAA (a new scheme for certain domestic companies), the scheme extends up to March 31, 2024. However, no proposal has been made to extend the same to March 31, 2025. I would like to add my view point that the same scheme can be extended till March 31, 2025, so that there is no sunset or deadline up to the current financial year, and the extra one-year period will provide a good period of tax concession for companies to save tax and make investments in projects of high return to derive maximum benefit.
• There have been no major changes in aspects of business income, capital gain assessment procedures, or other areas pertaining to international taxation. The changes are expected to be made in the new government budget in July 2024. However, certain provisions will have retrospective application as of April 1, 2024.

Interesting fact

• 115BAC (a new scheme for individuals) provides concessional tax rates without availing of certain deductions and concessions. An individual without business income can either opt for an old or new scheme and keep on changing it year after year. But an individual with business income can opt for change only once by filing Form 10IC. Now the interesting question is whether 115BAC applies to nonresidents. Based on my reading of the law and the circular, and based on my work experience, the same applies to nonresidents. A non-resident who has no business income can move from an old scheme to a new scheme, but a non-resident who has business income can opt for change only once, by filing a form. However, non-residents who earn income where tax is based on special rates need care. The above can be understood with the help of an example.

Let us say Mr. X, 67 years old (who is a nonresident), stays in the USA as his children are in the USA. He visits India only for 50 days. He earns pension income of 10 lakhs, interest income of 2 lakhs, and rental income of 3 lakhs. If the new scheme tax is less compared to the old scheme, then the same can be opted for. But non-residents will not get a rebate as laid out under 87A of the Act.

• As professionals, we are responsible for always analyzing sunset clauses under income tax as well as under GST. This will help educate the clients about the deadlines, if any, to be met for investment. But this year, being an interim budget, there are not many sunset clauses. But next year, on March 31, 2025, there will be a paradigm shift as many provisions will sunset on March 31, 2025.
• How ICAI conducts bank branch audit seminars and the Finance Act (relevant to FY) during April starting? Like wise, upon embarking on my qualification, I would even address various sunset clauses under income tax and GST as of March 31, 2025. By doing this seminar, it would add several value to provide advisory services and ensure the light of knowledge is thrown. This is because of my experience working last year on this project, and I hope the same will continue over the years, both for me and at ICAI.