In 2024, India implemented significant reforms to its income tax system, affecting individuals and enterprises.
Revision of tax structures
The 2024 budget introduced new tax rates for individuals:
- Annual income between ₹300,000 and ₹700,000 is now taxed at 5%.
- Income between ₹700,000 and ₹1,000,000 is taxed at 10%.
- Income between ₹1,000,000 and ₹1,200,000, 15%.
- Income between ₹1,200,000 and ₹1,500,000, 20%.
- Income above ₹1,500,000, 30%.
In addition, the standard deduction for salaried employees increased from ₹50,000 to ₹75,000.
Abolition of the ‘Angel Tax’
The government abolished the ”Angel Tax,” which taxed investments in unlisted companies that exceeded the market value of their shares, particularly benefiting startups and early-stage companies.
Capital Gains Tax modifications
The rates for capital gains were adjusted:
- Short-term capital gains are now taxed at 20%.
- Long-term capital gains have a 12.5% rate, with the exemption limit increased to ₹125,000.
Reduction in Withholding Tax Rates (WTR)
WTR rates for various payments were reduced:
- Insurance commissions, life insurance policy payments, and rentals decreased from 5% to 2%.
- Payments from e-commerce operators to participants decreased from 1% to 0.1%.
Transfer Pricing considerations
Although the reforms do not directly address Transfer Pricing, multinationals in India must review their policies to ensure compliance with current tax regulations and avoid potential penalties.
Frequent questions
- How do these reforms affect individual taxpayers? The new rates and deductions intend to increase disposable income and boost consumption.
- What does the elimination of the ”Angel Tax” entail? It facilitates investment in startups by eliminating levies on investments exceeding the market value of shares.
- What are the effects of the new WTR rates on enterprises? They simplify tax compliance and reduce the tax burden on certain payments.
For further information on the effects of these reforms and to ensure compliance with tax regulations in India, please do not hesitate to contact us at TPC Group. Our experienced team is at your disposal to provide you with customized advice.
Source: Business Today