Union Budget 2024: Key Highlights & Insights

25 July 2024

The Union Budget 2024-25, presented by Finance Minister Nirmala Sitharaman, outlines a comprehensive plan to drive economic growth and several significant changes aimed at reshaping the investment landscape. 

• Key adjustments include a hike in the tax rate for short-term capital gains (STCG) on equity investments held for less than a year from 15% to 20%, and an increase in long-term capital gains (LTCG) tax from 10% to 12.5% for shares held over a year. 

• Additionally, the Securities Transaction Tax (STT) on futures and options (F&O) securities was raised by 0.02% and 0.1%, respectively, to curb excessive speculative trading. These tax changes led to a sharp market reaction, with a 400-point drop immediately following the announcement.

• The increase in capital gains tax led to a notable decline in PSU stocks during the trading session following the budget announcement.

• Abolishment of Angel Tax: To boost startups and attract more investors, the government has abolished the angel tax. This move is expected to significantly enhance the fundraising capabilities of startups and encourage more venture capital (VC) investments.

• Standard Deduction Increase: The standard deduction for salaried employees has been increased from Rs 50,000 to Rs 75,000 under the new income tax regime.

• NPS Contribution:The deduction limit for employers' contributions to the National Pension System (NPS) has been raised from 10% to 14%.
  
  
• Tax Savings: Salaried employees under the new tax regime will save up to Rs 17,500 annually in taxes due to these changes.

• New income tax slabs have been proposed; nil for income up to Rs 3 lakh, 5 percent for income between Rs 3-7 lakh, 10 percent for Rs 7-10 lakh, 15 percent for Rs 10-12 lakh, 20 percent for Rs 12-15 lakh, and 30 percent for income above Rs 15 lakh.

In a bid to bolster the startup ecosystem, the budget abolished the angel tax, a significant barrier for early-stage investments. This move is expected to attract more venture capital and private equity funding, fostering innovation and growth among startups.

Moreover, the budget's focus on long-term investment and regulation of market volatility aligns with broader economic goals to ensure sustainable growth. By creating a more favorable environment for startups and implementing strategic tax reforms, the budget aims to balance market stability with promoting entrepreneurial ventures​.