The budget laid down by the finance minister of the BJP-led NDA government will provide an impetus to the Indian economy in terms of creation of job opportunities, reduction of unemployment, providing skilling and other opportunities for the youth of India.

She has laid down several measures in the realm of “Viksit Bharat” by focusing on productivity and resilience in agriculture, inclusive human resource development and social justice, urban development, energy security, thus ensuring the economy is on the growth trajectory. As we stand amid new hopes and expectations, there are nascent signs that the economy may be on a better footing than what it was in the year gone by.

Digital initiatives

With an intent to boost online trades, it has been proposed to remove the equalisation levy of 2 per cent levied on consideration received or receivable from e-commerce supply of goods or services on transactions entered on or after August 1, 2024. Such a move is a great initiative in contributing to the Government’s Digital India vision. Accordingly, exemption under income tax shall no longer be available pursuant to the withdrawal of the levy of EL.

Further, it has been proposed to establish dedicated e-commerce export hubs to enable MSMEs and traditional artisans to sell their products in international markets.

With effect from October 1, 2024, the government has also proposed to reduce withholding rates on payments from e-commerce operators to e-commerce participants (i.e., sellers) from 1 per cent to 0.1 per cent with an intent to promote more vendors to participate on the online platform by improving their working capital requirements and also bringing parity with regard to offline transactions which attracts a lower TDS/TCS rate.

Foreign investment

Corporate tax rate for a foreign company has been proposed to be reduced to 35 per cent from 40 per cent.

The taxability of long-term capital gains in case of non-resident for transfers taking place on or after July 23, 2024, is amended to 12.5 per cent from erstwhile tax rate of 10 per cent/20 per cent.

Provision of angel taxation (tax on issuance of shares by Indian corporates at premium) has been abolished from AY 2025-26, which shall result in increased foreign investments.

Shipping industry

Under a presumptive scheme of taxation, to promote cruise-shipping industry for a non-resident, engaged in business of operation of cruise ships, new provisions are proposed to be introduced whereby 20 per cent of aggregate amount received/ receivable by, or paid/ payable, on account of the carriage of passengers, shall be taxable as profits and gains of such cruise-ship operator.

In case where a foreign company opts for the above taxation scheme, any lease rentals paid by such foreign to a recipient company shall be exempt in the hands of such recipient company, if such recipient company and the foreign company are subsidiaries of the same holding company.

Charitable institutions

Emphasising that two main regimes for trusts or funds or institutions intend to grant similar benefits, few amendments have been proposed to rationalise and simplify provisions of taxation for charitable trusts/ institutions.

It has been proposed to maintain only one exemption scheme in the long run
and hence, two tax exemption regimes for charitable trusts will be unified, streamlining the process for charitable organisations, hereby, increase in ultimate public welfare.

In order to promote social welfare and equality in the
society, the government has also proposed to benefit the charitable trusts or institutions by introducing the condonation requests to principal commission of income taxes in filing application for seeking registration under the new regime.

Timelines shall be rationalised for grant of approval to certain funds or institutions who have not made timely applications for receiving donations u/s 80G.

The said applications have been proposed to be processed expeditiously.

It has also been proposed that no taxes will be levied on the merger of charitable trusts/ institutions subject to fulfilment of certain conditions.

MSME sector

MSMEs are growth engines of any economy and facilitating ease of doing business for such organisations have always been at the forefront of the government agenda. The Government has proposed to introduced Credit Guarantee Scheme in the manufacturing sector whereby –

a) Facility of term loans to be provided without any collateral;

b) New credit assessment model proposed to be developed by the Public Sector Banks in-house;

c) Continuation of credit support by banks during stress period to avoid NPA category stage;

d) Enhanced scope for mandatory onboarding in TReDS by reducing the turnover threshold from INR 500 crore to INR 250 crore;

f) Enhancing the limit of mudra loans from 10 lakh under ‘Tarun’ category to 20 lacs, etc;

g) Setting up MSME units for Food Irradiation, Quality & Safety testing duly accredited by NABL.

The above initiative should provide necessary push to the growth of the MSME sector.

Financial services

To promote international financial services, economic growth, employment opportunities and robust financial structure in India, further incentives have been proposed to be introduced under the direct tax laws to attract more foreign investment in IFSCs.

Dispute resolution

With the introduction of a faceless regime of appeals, a major challenge faced by taxpayers is with regard to pendency of disposal of appeals at the first appellate forums. Continuing its deepened focus to reduce the quantum of such pendency, the government has announced to deploy more officers to expedite the appeal disposal at first appellate forums.

Analysis by Dinesh Agarwal tax partner, EY. Views expressed are personal