Budget 2024: Corporate tax for foreign companies slashed to 35%, charities, cruise operations taxation revised

Union Finance Minister Nirmala Sitharaman simplifies tax regime, proposes new structures for charities, foreign companies, and capital gains in Budget 2024.

Simplifying the tax regime for corporate industries, Union Finance Nirmala Sitharaman on Tuesday, proposed new tax structures for charities, foreign shipping companies, rationalisation of capital gains in her 2024 Budget speech. She also reduced corporate tax on foreign companies from 40 to 35%. Ms. Sitharaman’s speech lasted just shy of ninety minutes

“58% of corporate tax came from the simplified tax regime in 2022-23 and more than 2/3rd of taxpayers have used the new personal tax regime last year,” announced Ms. Sitharaman.

Proposing several changes to the Income Tax of 1961, she said, “Two tax exemption regimes for charities are proposed to be merged into one. The 5% Tax Deducted at Source (TDS) rate on many payments is being merged into 2% TDS rate and 20% TDS rate on repurchase of units by mutual funds is being withdrawn”.

For e-commerce operators, TDS rate is reduced from 1% to 0.1%. Delay for payment of TDS upto due date of filing statement has been decriminalised.

Ms. Sitharaman also announced the simplification of capital gains taxation, exempting capital gains on certain financial assets to ₹ 1.25 lakh per year. Short-term gains on certain financial assets will be taxed at 20% and long term gains on all financial and non-financial assets will be taxed at 12.5%. The holding period for capital gains have been classified as one year for short term and two years for long term respectively.

“Unlisted bonds and debentures, debt mutual funds and market-linked debentures, will attract tax on capital gains irrespective of holding period,” said Ms. Sitharaman.

In a bid to bolster foreign investment in Indian start-ups, FM Sitharaman abolished angel tax for all investors. She also announced a simpler tax regime for foreign shipping companies operating domestic cruises in India. Changes include scrapping taxation for cruise ships, fixing profit and gains of cruise-ship operators to 20% of aggregate amount received. To promote diamond mining, she announced safe harbour rates for foreign mining companies selling raw diamonds in India.