25th July 2024 (10 Topics)
The Government’s Focus is on Ease of Paying Taxes
Context
The Union Budget 2024-25 has attracted attention for its emphasis on economic growth, tax reforms, and simplification initiatives aimed at bolstering India's position as a global growth engine.
Simplification and Rationalisation of Tax Structure
Objective:Enhancing Ease of Doing Business. The Budget focuses on simplifying and rationalising the tax structure to minimize disputes and broaden the tax base. This includes withdrawing the 2% equalisation levy on e-commerce transactions to align with OECD BEPS Action Plan, introducing safe harbour rules, and reducing corporate tax rates for foreign companies.
Impact:
- These measures are expected to improve investor sentiment, ease international taxation processes, and attract more foreign investments.
- The changes aim to strengthen India's economic participation in global frameworks and support sustainable economic growth.
- Overall, the Budget aims to enhance ease of doing business and foster a conducive environment for economic development.
Support for Startups and MSMEs
Objective:Promoting Startup Ecosystem. The Budget abolishes the angel tax to facilitate the orderly growth of Indian startups. This move aims to alleviate regulatory burdens and boost investor confidence in the startup sector.
Impact:
- Removal of the angel tax is anticipated to stimulate investment in startups, foster innovation, and enhance the entrepreneurial ecosystem.
- It is expected to propel India's position as a global hub for startups and encourage more startups to build and grow from India.
Ease of Compliance and Litigation Reduction
Objective:Simplification of Tax Procedures. The Budget focuses on easing compliance burdens and reducing litigation under the tax regime. Measures include introducing block assessment for search cases and reducing reassessment time limits.
Impact:
- These steps are aimed at streamlining tax administration, reducing compliance costs for taxpayers, and enhancing overall tax governance.
- Introduction of the 'Vivad se Vishwas Scheme, 2024' for settlement of pending appeals is expected to significantly reduce tax litigation and release stuck amounts.
- Digitisation of taxpayer services is also introduced to improve efficiency and promote transparency in tax administration.
Mains Question
Q. Discuss the key provisions and objectives of the Union Budget 2024-25 with respect to tax reforms, startup support, and simplification of tax procedures. How do these initiatives contribute to enhancing India's economic competitiveness and growth prospects? Illustrate with suitable examples and their potential impacts on the economy.
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