Budget 2024-25: Roadmap to India’s Financial Planning – Your Guide to Smarter Investing

Introduction to Taxes 

Taxes are mandatory financial charges or levies imposed on individuals or entities by governmental to fund various public expenditures. A shared pot of money that the government uses to pay for things we all need, like roads, schools, and hospitals. 

Taxes in India can be broadly categorized as below: 

1. Income Tax: Money you pay based on how much you earn

2. GST: A tax on goods and services you buy 

3. Corporate Tax: What companies pay on their profits 

Introduction to Budget 2024: 

The budget is important for the people of India as it directly impacts their daily lives. It outlines the government’s economic policies, tax structures, and spending priorities, which affect everything from the prices of everyday goods to job creation, after tax income, infrastructure development, and social welfare programs. Through the budget, citizens can understand how their tax money will be used and what economic opportunities or challenges they might face in the coming year. It also provides insights into the government’s vision for the country’s economic growth and development, making it a key indicator of India’s financial health and future direction. 

How Taxes and Budget Work Together: 

Government Budgeting: 

• Tax Revenue: The money collected from taxes is a big part of the government’s income. 

• Budget Planning: The government uses the expected money from taxes to plan how it will spend money in the coming year. 

Personal Budgeting: 

• Financial Planning: Knowing how much you owe in taxes helps you plan your finances accurately. 

• Tax-Saving Investments: You can include investments that save on taxes in your personal budget. 

Business Budgeting: 

• Tax Costs: Businesses must consider various taxes and any government incentives as part of the business financial plan. 

• Business Decisions: Taxes can affect business decisions and strategies, like where to invest or expand. 

Income Tax Slabs for Individual Taxpayers (New Regime for FY 2024-25) 

Income tax slab rates are designed to simplify taxation. New Tax regime tax slabs were tweaked as part of latest budget. The revised slabs are as follows: 

Tax Slab for FY 2023-24	Tax Rate	Tax Slab for FY 2024-25	Tax Rate
Up to ₹ 3 lakh	Nil	Up to ₹ 3 lakh	Nil
₹ 3 lakh – ₹ 6 lakh	5%	₹ 3 lakh – ₹ 7 lakh	5%
₹ 6 lakh – ₹ 9 lakh	10%	₹ 7 lakh – ₹ 10 lakh	10%
₹ 9 lakh – ₹ 12 lakh	15%	₹ 10 lakh – ₹ 12 lakh	15%
₹ 12 lakh – ₹ 15 lakh	20%	₹ 12 lakh – ₹ 15 lakh	20%
More than 15 lakhs	30%	More than 15 lakhs	30%

Tax Treatment of Different Asset Classes: 

Here’s a table summarising the tax treatment for various asset classes, including the percentage of tax applied to short-term and long-term capital gains (STCG and LTCG) and the holding periods required for each: 

Category	New		Earlier		Holding Period for Long Term
	STCG	LTCG	STCG	LTCG
Bonds (listed)	20%	12.50%	Slab rate	10%	12 months
Stocks	20%	12.50%	15%	10%	12 months
Equity Mutual Funds	20%	12.50%	15%	10%	12 months
Debt and non-equity MFs	Slab rate	Slab rate	Slab rate	Slab rate	N/A
REITs/InVITs	20%	12.50%	15%	10%	12 months
Equity FoFs	20%	12.50%	Slab rate	Slab rate	N/A
Gold/Silver ETF	20%	12.50%	Slab rate	Slab rate	12 months
Overseas FoFs	Slab rate	12.50%	Slab rate	Slab rate	12 months
Gold Funds	Slab rate	12.50%	Slab rate	Slab rate	12 months

Category	New		Earlier		Holding Period for Long Term
	STCG	LTCG	STCG	LTCG
Bonds (unlisted)	Slab rate	Slab rate	Slab rate	Slab rate	24 months
Real Estate (Physical)	Slab rate	12.50% with no indexation (OR) 20% with indexation whichever is lowest	Slab rate	20% with indexation	24 months
Gold (Physical)	Slab rate	12.50% with no indexation	Slab rate	20% with indexation	24 months
Stocks (unlisted)	Slab rate	12.50% with no indexation	Slab rate	20% with indexation	24 months
Foreign equities/debt	Slab rate	12.50% with no indexation	Slab rate	20% with indexation	24 months

Note: Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG) taxes generally don’t apply if you hold the assets until maturity. These tax categories come into play only if you decide to sell the assets before their maturity date. Holding the asset until maturity typically avoids these tax implications, as the gains or losses are realised only upon the sale of the asset. 

New Guidelines in the 2024-2025 Union Budget 

5 Key Points for Investors for the fiscal year 2024-2025 

1. Capital Gains Tax Simplification: 

• Short-term gains on specified financial assets will now be taxed at 20% (previously 15%) 

• Long-term gains on all financial and non-financial assets will attract a uniform tax rate of 12.5% 

• The exemption limit for capital gains on certain listed financial assets, such as stocks or mutual funds, has been increased from ₹1 lakh to ₹1.25 lakh per year. This means that if you make a profit from selling these assets, the first ₹1.25 lakh of your profit each year will not be taxed. 

2. Incentives for GIFT International Financial Services Centre (IFSC): Retail schemes and Exchange Traded Funds in IFSC will enjoy tax exemptions.  

• Retail Schemes: The new tax exemption means that if you buy an ETF or invest in other retail schemes within the GIFT IFSC and earn income (e.g., ₹10,000 from an ETF), you won’t have to pay tax on that amount. This aims to make GIFT IFSC a more attractive investment destination by offering tax incentives. 

• ETFs: Investors in ETFs traded within the GIFT IFSC will benefit from the tax exemption on earnings. For instance, earning ₹10,000 from an ETF in IFSC will be tax-free, encouraging more investments in these funds. 

3. Reduction in Corporate Tax for Foreign Companies: 

• The tax rate for foreign companies has been reduced from 40% to 35% to attract more foreign capital 

4. Abolition of Angel Tax: 

Investors in startups no longer pay the “angel tax” on their investments, making it easier for startups to raise money. 

• Abolition of Angel Tax: With the abolition of angel tax, startups will no longer face this additional tax burden on investments received from angel investors. This change significantly eases the fundraising process for startups, as they no longer need to worry about paying tax on the capital raised from angel investors. For instance, if an investor puts ₹50 lakh into a startup, the startup will not have to pay any additional tax on this investment, encouraging more investments into early-stage companies and supporting their growth and development. 

5. Infrastructure and Manufacturing Push: 

• A significant allocation of ₹11,11,111 crore (3.4% of GDP) has been made for capital expenditure 

• New schemes to incentivize employment in the manufacturing sector have been introduced 

• Development of ‘plug and play’ industrial parks in 100 cities and 12 new industrial parks under the National Industrial Corridor Development Programme have been announced 

The 2024-2025 Union Budget envisions transforming India into a developed nation, termed ‘Viksit Bharat.’ This ambitious plan aims for new opportunities by focusing on key areas such as investment, infrastructure, education, and innovation. The goal is to ensure that the benefits of economic growth are widely distributed, contributing to a stronger and more prosperous nation. 

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