Despite being an interim budget, there were expecta tions that the government would announce certain di rect tax measures that focus towards the ‘Make in In dia’ initiative, create job opportunities and other measures to sustain a strong and stable economy. This expectation was also in line with the previous interim budgets where the government had announced several amendments in the tax provisions.
However, in the budget, the finance minister announced no changes in the tax proposals and retained the existing tax rates for both direct taxes and indirect taxes, including import duties.
The budget provided for extension of certain incentive provisions that were expiring on 31 March 2024 in order to provide continuity of these benefits and for taking certain administrative measures in order to improve taxpayer services and promote the ease of living and the ease of doing business.
The existing tax holiday for start-ups, expiring on 31 March 2024, has been extended by one year up to 31 March 2025. Recognised start-ups, certified by the Department for Promotion of Industry and Internal Trade (DPIIT) and engaged in certain eligible businesses, are allowed 100% tax deduction on their profits for any 3 consecutive years out of 10 years beginning from the date of incorporation.
Similarly, commencement of operations by the investment division of offshore banking unit (Category‑I FPIs) located in International Financial Services Centre (IFSC) has been extended up to 31 March 2025, for exemption of certain incomes. In line with this, exemption for royalty / interest income arising to non-residents from leasing of aircraft/ship and income from transfer of such leased aircraft/ ship has been extended till 31 March 2025.
Certain income earned by eligible wholly owned subsidiary of Abu Dhabi Investment Authority, sovereign wealth fund and foreign pension funds has also been extended for investments made up to 31 March 2025. However, the concessional tax rate of 15% available to new manufacturing companies that commence manufacturing by 31 March 2024 has not been extended. In the backdrop of several large investments announced by corporates across sectors and in line with the mega ‘Make in India’ initiative, it was widely expected that the sunset date for new manufacturing companies would also be extended.
The extension would provide opportunities to companies currently in the process of setting up or evaluating India as a potential investment destination.
The time limit to introduce faceless scheme for transfer pricing assessment and Dispute Resolution Panel (DRP) proceedings, as well as a scheme for bringing in efficiency, transparency, and accountability in the Income Tax Appellate Tribunal (ITAT) in line with the faceless scheme introduced earlier for income tax assessments has been extended up to 31 March 2025.
The FM also alluded to some of the measures taken by the government to improve taxpayer services in her speech and in line with that, the government announced withdrawal of outstanding tax demands of up to Rs 25,000 for years up to Financial Year (FY) 2009-10 and up to Rs 10,000 for FYs 2010-11 through 2014-15.
As per government’s records, there are a significant number of small, non-verified, non-reconciled and disputed tax demands for about 1 crore taxpayers, considered as collectible by the government.
This is a welcome step and will not only help the government clean its books but will also provide relief to taxpayers and help in releasing refunds of subsequent years, currently held up or adjusted due to these demands.
All eyes after the elections will now be on Finance Bill (No 2) of 2024 that the elected government is likely to present later this year, in order to continue the pace of development and to be the world’s third-largest economy achieving a GDP of $ 5 trillion by 2027, surpassing Japan and Germany.
AMIT PAHWA,
Partner, Deloitte India