Finance Minister Nirmala Sitharaman announced in Parliament that taxpayers now have the option to choose between the old and new long-term capital gains (LTCG) regimes. This announcement, part of the Union Budget for 2024-25, was made on Wednesday, August 7. The Finance Minister emphasized that the revised LTCG option on real estate aims to impose no additional tax burden on taxpayers.
The amendment gives taxpayers the choice to calculate and determine what works better for them. This ensures there will be no additional tax burden on the people, she added. Under the current amendment, taxpayers with assets acquired before July 23 can compute tax under the old scheme with indexation or the new scheme and pay the lower tax. Removal of indexation in LTCG on real estate was not done for revenue considerations but for simplification, Sitharaman explained.
The Finance Minister also highlighted the growing preference for the New Tax Regime, with 72.8 per cent of taxpayers opting for it this year. She pointed out that the effective tax on an annual income of Rs 15 lakh was reduced to 10 per cent in 2023, which was further reduced this year under the new I-T regime. This, she said, has benefited the middle class, which has been at the forefront of the government's considerations in various tax proposals.
In addition to the changes in the LTCG regime, the Union Budget also proposed several amendments to the Customs duties. These changes are aimed at boosting domestic production and enhancing export competitiveness. Customs duty reductions are aimed at lowering the cost of raw materials, with rate cuts proposed for labor-intensive industries and exemptions and reductions on 27 critical minerals such as lithium and cobalt. Duty rate cuts for gold and silver have also been introduced.
The Finance Minister also pointed out that rate cuts on several inputs for the leather and textiles industries aim to boost employment and reduce costs. A comprehensive review of the rate structure is planned for the next six months. These changes in Customs duties are expected to promote trade and employment in the country, and support emerging sectors.
The Finance Minister also addressed the improvements in the income tax return (ITR) filing process. According to her, the average processing time of ITR has been reduced from 93 days in 2013 to 10 days now, thereby making refunds faster. This has been achieved by the introduction of updated income tax returns systems and processes, as well as simplification of the personal tax regime over the years that has made filing of tax returns easier.
The number of ITRs filed shot up to a record 7.28 crore in 2024-25, representing a 7.5 per cent jump over the 6.77 crore ITRs filed for AY 2023-24 till July 31 last year. The number of first-time filers has also increased, with 58.57 lakh new taxpayers joining the fold. This indicates a widening of the tax base, which is a positive sign for the economy.
The Union Budget for 2024-25, as presented by Finance Minister Nirmala Sitharaman, aims to simplify the tax regime, reduce the tax burden on the middle class, and boost domestic production and export competitiveness. The changes in the LTCG regime and Customs duties, along with the improvements in the ITR filing process, are expected to have a significant impact on the economy and the taxpayers. These measures reflect the government's commitment to fostering economic growth and ensuring a fair and simplified tax system.
