Though there weren’t any big bang moves, Interim Budget 2024 has three proposals worth taking note from the income tax point of view.
Withdrawal of outstanding direct tax demands
The Finance Minister has emphasised on the burden of unresolved direct tax demands dating back to 1962. The Government intends to alleviate this burden by withdrawing outstanding direct tax demands up to ₹25,000 for the period up to Financial Year (FY) 2009-10 and up to ₹10,000 for FY2010-11 to 2014-15, benefiting around a crore taxpayers nationwide. This initiative not only eases burden on taxpayers but also strengthens efficiencies in tax administration, aligning with government’s vision of enhancing ease of living and doing business.
A formal notification or instruction from the CBDT could be forthcoming on laying procedures and timelines to implement this.
Partial integration of agricultural income
The Budget has introduced a proposal for applying the partial integration of agricultural income with non-agricultural income under new taxation regime for individuals, as a corrective measure to rectify an earlier omission. As the erstwhile Finance Act already considered the impact of partial integration under the new regime for advance tax purposes, this amendment may not have any additional tax outflow for taxpayers.
For instance, let’s consider A has chosen the concessional tax regime for FY 2024-25 and has earned agricultural income amounting to₹2 lakh along with non-agricultural income of₹9 lakh. The tax liability applying the partial integration mechanism is captured in the accompanying table.
Proposed amendments for TCS rates
The Budget has also proposed retrospective amendment in existing provisions of Section 206C(1G) of the Income Tax Act, 1961, with an intention to align it with Circular No 10 of 2023 (Circular) on TCS rates. Accordingly, TCS rates applicable on payment under Liberalised Remittance Scheme (LRS) and payment towards overseas tour packages would be as follows:
For example, A sold an OTP to B in August 2023 for lakh ₹7.5 lakh. According to the Circular and proposed retrospective amendment in Finance Bill 2024, A would have collected TCS at 5 per cent (applicable for the period July 2023 to September 2023) on the entire receipt of ₹7.5 lakh.
Similarly, if A sold an overseas tour package to C in February 2024 for ₹15 lakh, he would be liable to collect tax at 5 per cent on amount up to ₹7 lakh and at 20 per cent on the balance receipt of ₹8 lakh.
The proposal for partial integration of agricultural income and the aligns the tax landscape between old and new regimes. The shift from circular to statute with respect to TCS rates ensure alignment and clarity within the taxation framework.
All in all, the current Budget gave taxpayers a taste of vote on account with minimal changes under direct tax, keeping their hopes high regarding beneficial amendments in the full Budget in July post elections.
Sandeep Jhunjhunwala is Partner and Amita Jivrajani, Director, Nangia Andersen LLP