Union Finance Minister Nirmala Sitharaman, in her 2024 Budget speech, announced significant changes to the corporate tax regime, including a reduction in the corporate tax rate for foreign companies from 40% to 35%. Her speech, which lasted just shy of ninety minutes, also introduced new tax structures for charities, foreign shipping companies, and rationalized capital gains taxation.
Proposing several amendments to the Income Tax Act of 1961, Sitharaman stated, “Two tax exemption regimes for charities are proposed to be merged into one. The 5% Tax Deducted at Source (TDS) rate on many payments is being merged into a 2% TDS rate, and the 20% TDS rate on repurchase of units by mutual funds is being withdrawn.” Additionally, the TDS rate for e-commerce operators has been reduced from 1% to 0.1%, and the delay for TDS payment up to the due date of filing statements has been decriminalized.
Sitharaman also announced the simplification of capital gains taxation, exempting capital gains on certain financial assets up to ₹1.25 lakh per year. Short-term gains on specific financial assets will be taxed at 20%, while long-term gains on all financial and non-financial assets will be taxed at 12.5%. The holding period for capital gains has been classified as one year for short-term and two years for long-term. “Unlisted bonds and debentures, debt mutual funds, and market-linked debentures will attract tax on capital gains irrespective of the holding period,” said Sitharaman.
To bolster foreign investment in Indian startups, the Finance Minister abolished the Angel Tax for all investors. She also announced a simplified tax regime for foreign shipping companies operating domestic cruises in India, including scrapping taxation for cruise ships and fixing the profit and gains of cruise-ship operators to 20% of the aggregate amount received. Additionally, to promote diamond mining, she introduced safe harbor rates for foreign mining companies selling raw diamonds in India.
This Budget, the seventh presented by Sitharaman and her second term as Union Finance Minister, focused on agriculture, employment, human development, energy security, manufacturing, innovation, infrastructure, and next-generation reforms. In her speech, Sitharaman thanked the people for awarding Prime Minister Narendra Modi a historic third term.
The Budget aims to drive economic growth, attract foreign investment, and support startups while simplifying the tax regime for various sectors.
