Finance Bill - Definition, Features & Changes in Tax Structure (2024)

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Union Budget Analysis on Finance Bill for FY 2024-25

Here are some of the major details of finance bill announced in the Union Budget 2024-2025 by the Finance Minister, Nirmala Sitharaman on 23 July 2024:

1. Some of the major highlights in the Finance Bill announced in the Union Budget 2024-2025 on 23 July 2024 are:
   1. Simplified tax regime for charities
   2. Simplified TDS rate structure
   3. Provisions for reassessment
   4. Search provisions and capital gains taxation.
2. Other major proposals in the Finance Bill are:
   1. Withdrawal of equalization levy of 2.00%
   2. To certain funds and entities in IFSCs, expansion of tax benefits has been announced
   3. Under the Benami Transactions (Prohibition) Act, 1988, to improve conviction immunity to be provided against penalty and prosecution to benamidar on full and true disclosure.

Features of the Finance Bill

1. Finance Bills are divided into three classes - Finance Bill Category I, Finance Bill Category II, and the Money Bill.
2. Money Bills contain provisions related to regulation or borrowing, amendments to tax laws at the Union or the state level, withdrawal of money from a contingency or consolidated fund, etc.
3. Finance Bills, of both categories, contain provisions related to expenditure, taxation, or any other matter.
4. A Money Bill will always be a Finance Bill. However, a Finance Bill need not necessarily be a Money Bill.
   
5. The Finance Bill can only be introduced in the lower chamber of the Parliament or the Lok Sabha.
6. The Rajya Sabha can make recommendations to the bill. The bill will have to be returned by the Rajya Sabha within 14 days of receiving it, else it will be deemed as passed.
7. If the bill is returned without any recommendations to the Lok Sabha, the same will be presented to the President for his/her approval.
8. Even if the bill is returned with recommendations, the Lok Sabha has the power to accept or reject all of these recommendations. The Lok Sabha will have to inform the Rajya Sabha about the status of the recommendations.
9. Whether the Lok Sabha accepts all the recommendations or not, the bill will be deemed to have been passed by both the Houses.
10. For all other bills, the final passing of the said bill will happen at the Rajya Sabha. However, for Money Bills, the final passing will happen at the Lok Sabha. This will then be sent to the President of India for his/her assent.
11. The President cannot return a Money Bill will recommendations to the Lok Sabha, for any purpose.

Interim Union Budget 2024-25 Update

On 1 February 2024, Finance Minister Nirmala Sitharaman presented the Interim Union Budget 2024-25 at Parliament.

The government's initiative to increase living standards and business accessibility is aligned with the Interim Budget 2024-25's proposal to waive old, unreconciled trivial tax outstanding.

Numerous unverified, disputed, or non-reconciled direct tax demands, some of which date back to 1962, are still on file. This has resulted in administrative challenges and delays in refunds in the following years.

It has been proposed to waive such unpaid direct tax demands up to Rs.10,000 for the financial year 2010–11 to 2014–15 and up to Rs.25,000 for the financial year 2009–10.

Regarding the applicability of this tax proposal to corporations or individual taxpayers, nothing specific has been stated. Approximately 1 crore taxpayers will benefit from this decision.

The Finance Bill 2024 does not make any specific recommendations in this area. Therefore, theCentral Board of Direct Taxes (CBDT) will likely issue a separate circular to offer the previously stated relief.

Changes in the Tax Structure for FY 2023-24

The following are the changes in 2023 tax structure as per the Union Budget 2023-2024:

1. The number of slabs in the new tax structure has been reduced to five

1. Tax rebate limit raised to Rs.7 lakh, which makes income up to Rs.7 lakh tax free
2. Income above Rs.5 lakh from insurance policies will not be tax-free
3. Salaried person with income of Rs.15.5 lakh or above will be benefited by Rs.52,500
4. Tax exemption on Leave Encashment limit raised to Rs.25 lakh from Rs.3 lakh
5. Highest surcharge rate reduced from 37% to 25%, thereby reducing maximum tax rate to 39%

1. New income tax regime will now be the default tax regime
2. The new personal tax rates are:

1. 0 to Rs.3 lakh- nil
2. Rs.3 lakh to Rs.6 lakh- 5.00%
3. Rs.6 lakh to Rs.9 lakh- 10%

1. Rs.9 lakh to Rs.12 lakh- 15%
2. Rs.12 lakh to Rs.15 lakh- 20%

1. Acquisition financing will be permitted by IFSC unit of foreign banks
2. National Financial Information Registry (NFIR) to be designed in consultation with Reserve Bank of India

Changes in the Tax Structure for FY 2022-23

1. A new tax regime was introduced by the Government which an individual could choose to pay tax at lower rates. However, very few deductions and exemptions were available. You have had to choose either the old tax regime or the new tax regime. You can change your regime every year if you are a salaried individual, but the same is not applicable if you own a business.
2. Earlier, if you failed to file your income tax returns by 31 July, you could complete it within 31 March of the next year including any correction required. However, the new rule states that in case you miss the filing of your income tax returns by the due date, then the last date is 31 December of the same financial year.
3. Until 31 March 2020, dividends received from Indian Companies as well as mutual fund schemes were exempted from being taxed. However, the new changes in tax structure completely remove the exemption on your dividend income and make it taxable. If the dividend income exceeds Rs.5,000 then it will be taxable.
4. The interest received on your provident fund account with respect to your own contribution was completely exempted from being taxed even for contributions made beyond the 12% of your basic salary. However, the change in tax structure means that you can no longer enjoy this exemption for the annual contributions made beyond Rs.2.50 lakhs every year after 1st April 2021.
5. The 2021 Union Budget proposed to remove the exemption on any maturity proceeds received from any life insurance product including a ULIP (Unit Linked Insurance Plans).

Proposals made in the Finance Bill Union Budget FY 2021-22

The Union Budget 2021 has been presented by Mrs. Nirmala Sitharaman Mr. Arun Jaitley, the Finance Minister of India, to the Parliament on 1 February 2021. Various amendments were made under the Finance Bill 2021 by Mrs. Sitharaman. Some of the amendments under Finance Bill are mentioned below:

1. Under Sections 10(11) and 10(12), the threshold for contributions made to the provident fund was increased from Rs.0.25m to Rs,0.5m, in case of the event of no contribution made by the employer to the fund. The amendment also appears to provide benefits to government employees in the event of no contribution from the government to the provident fund.
2. Under Section 10(4D), the investment branch of the OBU under IFSC will now need to register as s a Category-I Foreign Portfolio Investor (FPI) in order to qualify as a specific fund.
3. The Finance Minister during the Union Budget speech had proposed setting up of Developmental Financial Institutions (DFIs) to aid in the long-term debt financing of the infrastructure sector. Hence, a new provision has been inserted where any interest accruing or income arising to a DFI be exempted from being taxed. A similar provision has been inserted for any income arising or interest accruing to an institution set up under an Act of the Parliament for financing infrastructure and development for ten consecutive financial years.
4. Under the Finance Bill, a new provision has been inserted where a transfer of an asset by a public sector company (PSC) to another PSC, or Central Government, or State Government, or by India Infrastructure Finance Company Limited to an institution set up under an Act of the Parliament for financing infrastructure and development, to exempt the capital gains from being taxed.
5. Under Section 112A, ULIPs will be considered an 'equity-oriented fund' provided the investment criteria of 90% or 65% are fulfilled throughout the insurance policy term.
6. There are various amendments made to the Finance Bill and were passed by both the houses, the details of which you will be able to find on the Government's official website.

The Union Budget of India, which is also known as the Annual Financial Statement, is a financial declaration made by the Government of India that lists out the estimated expenditures and receipts of the government for a particular financial year. As per Article 110 (a) under the Constitution of India, a finance bill is to be mandatorily presented with the budget.