Budget 2024 Tax Proposals Impacting NRIs... All The Details Here

Summary

In this special episode of NRI Money Clinic, Dr. Chadan and expert CA discuss the 2024 budget presented by Finance Minister Nala Sitaraman. They delve into the implications for NRIs and tax provisions, highlighting changes in income tax slabs, standard deductions, and capital gains tax. The experts clarify that while some tax rates are simplified, others like the security transaction tax on futures and options have increased. They emphasize the importance of understanding these proposals as they await final legislation, as they may impact both residents and NRIs differently.

Takeaways

• 📋 The 2024 budget is the first from the newly elected government and includes provisions that may impact NRIs and taxes.
• 🔑 All announcements in the budget are proposals and require approval from the Rajya Sabha and the President before becoming law.
• 🌐 The budget's amendments are applicable from the financial year 2024-2025, affecting assessment year 2025-2026 onwards.
• 💼 For normal non-resident individuals with investment incomes, there are no specific provisions exclusive to them; all individuals are affected equally by the changes.
• 📉 The income tax slab rates have been altered under the new tax regime, potentially leading to tax savings for individuals.
• 💰 The standard deduction for salary income under the new tax regime has been increased from INR 50,000 to INR 75,000, offering additional tax benefits.
• 📈 The capital gains tax has been rationalized with changes in rates and holding periods for different types of assets.
• 🏦 Long-term capital gains tax on equity shares and equity-oriented mutual funds has increased from 10% to 12.5%, with an increased exclusion limit from INR 1 lakh to INR 1.25 lakhs.
• 🏠 For property sales, the long-term capital gains tax rate is set at 12.5% without indexation benefits, a change from the previous 20% rate with indexation.
• 🔄 The provisions for claiming deductions on reinvestment of long-term capital gains into residential houses or bonds remain unchanged.
• 🔗 The budget proposals will not impact Double Taxation Avoidance Agreements (DTAAs) as they are bilateral agreements separate from India's domestic tax laws.

Q & A

What is the significance of the budget presented by Nala Sitaraman on 23rd July 2024?

The budget presented by Nala Sitaraman on 23rd July 2024 is significant as it is the first budget from the newly elected government. It outlines the financial plans and proposals for the year, which can impact various sectors including taxes, investments, and the economy as a whole.

What is the status of the announcements made in the budget?

The announcements made in the budget are only proposals at this stage. They need to be approved by the Rajya Sabha and the President before they can be implemented. As of now, they are not yet in effect.

How do the budget provisions impact non-resident Indians (NRIs)?

The budget provisions generally impact all individuals, whether they are residents or non-residents. However, specific provisions related to taxation on income from investments or business transactions in India may have a more direct impact on NRIs.

What changes have been made to the income tax slabs under the new tax regime?

The income tax slabs under the new tax regime have been adjusted to provide some tax relief. The new slabs are 0 to 3 lakhs at 0%, 3 to 7 lakhs at 5%, 7 to 10 lakhs at 10%, 10 to 12 lakhs at 15%, 12 to 15 lakhs at 20%, and 15 lakhs and above at 30%.

How does the increase in standard deduction under the new tax regime affect taxpayers?

The increase in standard deduction from 50,000 to 75,000 under the new tax regime can provide additional tax savings for taxpayers, especially those in the 30% tax bracket. This can reduce their overall tax liability.

What are the implications of the changes in capital gains tax?

The changes in capital gains tax include an increase in the short-term capital gains tax rate from 15% to 20% for equity shares and equity-oriented mutual funds. Additionally, the holding period for long-term capital gains for some assets has been reduced from 36 months to 24 months, and the tax rate for long-term capital gains on these assets has been reduced from 20% to 12.5% without indexation benefit.

How does the removal of indexation benefit affect long-term capital gains?

The removal of indexation benefit means that the cost of the asset will not be adjusted for inflation. This can result in a higher taxable capital gain and potentially higher tax liability for assets sold at a profit.

What is the impact of the changes in the security transaction tax on futures and options?

The increase in the security transaction tax rate from 0.1% to 0.2% on futures and options transactions may discourage frequent trading and encourage more long-term investing. It could also serve as a revenue-generating measure for the government.

How do the budget proposals affect double tax avoidance agreements (DTAAs) between countries?

The budget proposals are unilateral changes specific to India and do not impact the bilateral agreements like DTAAs. Therefore, the provisions of DTAAs will remain unaffected by these domestic tax changes.

What is the significance of the 'Angel Tax' and its changes in the budget?

The 'Angel Tax' is a tax on share premium received by a company for issuing shares at a rate exceeding the fair market value. The removal of Section 56(2)(x) from the Income Tax Act means that this specific provision for taxing share premiums is no longer in effect, potentially benefiting startups and companies raising capital.

How do the budget proposals impact transactions executed before the budget announcement date?

For transactions executed between 1st April 2024 and 22nd July 2024, the old tax rules and rates apply. However, for transactions executed on or after 23rd July 2024, the new provisions will apply, subject to the final approval of the budget proposals.