Economic Survey 2023-24 – a snapshot of tax revenue
- Economic Survey 2023-24 was tabled on July 22, 2024
- Growth in Gross Tax Revenue (GTR) was estimated to be 13.4% - with 15.8% growth in direct tax and 10.6% growth in indirect tax
- 55% of aggregate GTR accrued from direct taxes and the remaining 45% from the indirect taxes
- Increased contribution of direct tax to GTR has been in line with governments effort to enhance progressivity in taxation
- Efficiency of cost collection also increased – cost of collection of direct taxes declined from 0.66% of gross collections in financial year 2020-21 to 0.51% in financial year 2023-24
Introduction
Finance Minister Nirmala Sitharaman presented Union Budget on July 23, 2024, the first Budget of Modi Government 3.O.
Some of the key highlights are as follows:
- Comprehensive review of Income Tax Act, 1961 to make it concise, lucid, easy to read and understand.
- Direct Tax: Simplified capital gains tax regime, abolished angel tax, withholding rates rationalized, abolished equalization levy, and consolidated tax regime for charitable institutions.
- Indirect Tax: Changes in custom duty rate structure to support domestic manufacturing and simplify taxation.
Angel Tax
- Infusion of share capital in an Indian unlisted company by resident as well as non-resident was required to be undertaken at a prescribed value
- Subscription price in excess of prescribed value was taxable – commonly referred to as "Angel Tax"
- Indian company issuing shares was liable to tax - deterring their fund-raising capability
- Budget 2024 seeks to abolish Angel Tax from financial year 2024-25 onwards
Buy-back treated as dividend
- Special provisions were introduced in 2013, to tax buy back of shares in the hands of company
- Budget 2024 proposes to treat buy back as "dividend"
income:
- Taxable under the head "income from other sources" in the hands of the shareholders – taxed at the applicable rate
- No deduction of expenses against such dividend income
- Cost of acquisition paid by shareholders shall be treated as
'capital loss'
- Capital loss can be carried forward and set-off against (relevant) capital gains income
- Company undertaking buy back shall apply a withholding at the rate of 10% (applicable rate / treaty benefits for non-residents)
- These proposals shall apply to any buy-back undertaken on or
after October 1, 2024
- Short window available to distribute excess cash, if any
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
