INDIA’S TAX REFORMS IN 2024: ADDRESSING EVASION AND IMPROVING COMPLIANCE

This article has been written by Sathya Sruthi, currently in her 4th year pursuing BBA LLB in Symbiosis Law School Hyderabad.

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ABSTRACT:

India’s tax reforms in 2024 are focused on addressing tax evasion and improving compliance through technological advancements, simplification of processes, and stricter enforcement mechanisms. These reforms are aligned with the broader policy framework that emphasizes inclusive growth, especially for women, children, and farmers. Various schemes by the Union government, such as the PM-KISAN for farmers, POSHAN 2.0 for child nutrition, and support programs for women entrepreneurs, are designed to foster economic empowerment. This paper examines key tax reforms, their impact on compliance, and the relevant government initiatives aimed at improving welfare and economic inclusiveness.

INTRODUCTION:

Tax reforms in India have evolved to tackle growing economic challenges, with a focus on broadening the tax base, addressing tax evasion, and improving voluntary compliance. In 2024, the Union government has taken significant steps to modernize the tax system, promote transparency, and ensure that every section of society, including women, children, and farmers, benefits from the country’s economic progress. In order to address the issue of tax evasion the authorities have expanded the capacities of the audit and regulations in the beneficial  ownership stringent and transparency. The digital tracking methods have been inculcated like the e-invoicing, the underreporting tax detection system. The tax authorities also leverage data analytics and AI to detect irregular patterns and possible evasion. This paper delves into these reforms and how they align with the government’s schemes for marginalized groups, fostering equitable growth.[1]

TAX REFORMS 2024 :

There are lot of changes that has been implemented from 1^st April . The changes include new regulations and reforms on the exitsing one. The finance minister Nirmala Sitharaman presented the changes in the new income tax rule in the budget. The detailed version of those changes will be dealt in the following points:

• Revision in the Tax Slabs and Benefits:

The new tax regime offers the updated slabs where the 0% tax rate is upto to the income fo 3lakhs and the gradual increasing of 30% above 15 lakhs. The additional benefits that were introduced is that standard deduction of RS.75,000 applicable over the salaried individuals and the 25,000 rupees over raised family pension.

• The Deducing Surcharges for High Income: The assessee or people who eligible for tax payment whose income is above 5 crores the surcharge rate has been reduced from 37% to 25% under the new tax regime.
• Switching between regimes: The taxpayers can choose the new regime as the default slab and people with non-business income can switch on yearly basis where the business income earners can switch in their entire lifetime.
• The Higher Rebate Limit: The rebate limit under Section 87A is now increased to 25,000 if the tax payer has an income upto 7 lakhs which refers to the person with income below his threshold and not required to pay tax
• Life Insurance and Capital Gain Tax Adjustments: The life insurance proceeds for premiums that exceed 5 lakh as today are now eligible for tax liability and the changes that occur in the capital gains also include the holding period as a simplified one. The new tax rates are 12.5% for the Long Term Capital Gains (LTCG) and 20% for the Short Term Capital Gain (STCG). The buybacks that are taxed are considered to be deemed dividends.
• Enhancement of Standard Deduction and Encashment Exception: The standard deduction given to a person who receives salary would be 75,000 and the exemption would be 25 lakhs which has surged up for the leave encashment that is offered to non-government employees.[2]

PRIORITIES ON DIRECT TAXES:

1^st Priority to ‘Viksit Bharat’ in Agriculture that is brought in this budget to strengthen productivity and resilience in agricultural sector of India. The key initiatives was to enable sustainability, farmer welfare and enhancing the output.

1. Release of 109 Climate-Resilient Crop Varieties:
   • This initiative will introduce high-yielding, climate-resilient varieties of 32 crops to help farmers combat climate change challenges like droughts, floods, and pests. These varieties are tailored to withstand various environmental stresses, ensuring stable yields despite adverse weather conditions.
2. Natural Farming Certification for 1 Crore Farmers:
   • The government plans to promote natural farming practices by certifying 1 crore farmers across India. This involves using bio-inputs rather than chemical fertilizers and pesticides, encouraging sustainable, eco-friendly farming. Certified natural farming also opens market opportunities for farmers, as consumers increasingly seek organic and naturally produced goods.
3. 10,000 Bio-Input Centers for Natural Farming:
   • These centers will provide essential bio-inputs (e.g., compost, bio-pesticides) and training to farmers engaged in natural farming. They will act as hubs for local, sustainable agricultural resources, supporting a shift from chemical to bio-based farming inputs.
4. Digital Public Infrastructure (DPI) for Agriculture:
   • DPI for Agriculture will be a digital framework designed to connect and support farmers with information and resources. In three years, this platform aims to integrate various databases (land records, crop information, weather forecasts) and services (market prices, government schemes), facilitating data-driven decisions, precision farming, and easy access to resources and government support.

The Employment & Skilling Priority in the Budget focuses on increasing job creation, enhancing workforce skills, especially for youth and women, and improving access to education and financial support. Here’s a breakdown of the initiatives:

1. Employment Linked Incentive (ELI) Schemes:
   • Three schemes under the Prime Minister’s package are tailored to create and sustain employment opportunities:
     • Scheme A: Offers salary support for first-time employees to encourage workforce entry.
     • Scheme B: Provides incentives for job creation specifically within the manufacturing sector, aiding both employees and employers through contributions to the Employee Provident Fund Organization (EPFO) in the initial years.
     • Scheme C: Reimburses employers up to ₹3,000 per month for two years per new employee, reducing hiring costs and encouraging businesses to expand their workforce.
2. Women’s Workforce Participation[3]:
   • The focus is on increasing women’s participation in the labor force by providing supportive facilities and targeted skilling initiatives:
     • Working Women Hostels and Crèches: Set up in collaboration with industries, these will help women manage work and family commitments by providing safe accommodation and childcare.
     • Women-Specific Skilling Programs: Training programs for women will be organized to develop job-specific skills, making them competitive in various industries.
     • Market Access for Women’s Self-Help Groups (SHGs): Support to ensure that products from women-led SHGs reach wider markets, promoting entrepreneurship and financial independence.
3. Skill Development:
   • A new, centrally sponsored skilling scheme aims to prepare youth for employment across sectors. This will focus on high-demand skills, modern technical knowledge, and support for industrial training.
   • Model Skill Loan Scheme: Revised to offer loans up to ₹7.5 lakh, this scheme supports students and young professionals in financing their vocational training, certification, and skill development, encouraging more individuals to acquire job-ready skills.
4. Education Loans:
   • Loans up to ₹10 lakh will be available for students who don’t currently benefit from any other government education scheme. This aims to widen access to higher education and professional courses, allowing underprivileged students to finance studies in domestic institutions without financial barriers.[4]

The Inclusive Human Resource Development and Social Justice Priority emphasizes economic development across regions, empowerment of women, and socio-economic support for marginalized communities. Here’s an overview of the key components[5]:

1. Purvodaya[6]:

• Under the Purvodaya initiative, the focus is on boosting industrial and energy infrastructure in the eastern region of India to enhance regional development:
  • Industrial Node at Gaya: A new industrial hub will be developed in Gaya, Bihar, as part of the Amritsar-Kolkata Industrial Corridor, bringing jobs, boosting local economies, and attracting investments.
  • 2400 MW Power Plant at Pirpainti: This power plant, with an investment of ₹21,400 crore, aims to meet energy needs, support industry, and improve electricity access in the region, driving economic growth in eastern India.

1. Andhra Pradesh Reorganization Act:

• As part of efforts to develop Andhra Pradesh’s infrastructure following its reorganization, ₹15,000 crore will be allocated to establish new industrial nodes:
  • Industrial Nodes in Kopparthy and Orvakal: New industrial zones are planned at Kopparthy and Orvakal, aligning with major economic corridors (Vishakhapatnam-Chennai and Hyderabad-Bengaluru). This infrastructure development aims to create employment and attract investment, bolstering economic growth in Andhra Pradesh.

1. Women-led Development:

• ₹3 Lakh Crore Allocation for Women and Girls: A substantial budget supports schemes that focus on education, healthcare, skill development, financial inclusion, and business opportunities for women and girls. This allocation underscores a commitment to advancing gender equality, reducing disparities, and empowering women as key contributors to the economy.

1. Pradhan Mantri Janjatiya Unnat Gram Abhiyan[7]:

• This initiative focuses on improving the living standards of tribal communities:
  • Socio-Economic Support: Covering 63,000 villages in tribal-majority and aspirational districts, this program targets the well-being of 5 crore tribal people by enhancing access to healthcare, education, infrastructure, and livelihood opportunities, aiming for inclusive growth in remote tribal areas.

1. Bank Branches in the North-East:

• 100 New India Post Payment Bank Branches: To improve financial inclusion in remote areas of the North-East, 100 branches of India Post Payment Bank will be established. These branches will increase access to banking services, support digital transactions, and promote economic integration in these underbanked regions.

The Manufacturing & Services Priority emphasizes empowering MSMEs, boosting exports, securing essential minerals, and strengthening digital infrastructure for services. Here’s a detailed look at these initiatives:

1. MSMEs (Micro, Small, and Medium Enterprises):
   • This budget allocates resources to support MSMEs through improved access to credit, especially during financial hardships, aiming to keep these businesses resilient and competitive:

• Collateral-Free Credit Guarantee for Machinery: MSMEs can access loans for purchasing essential machinery and equipment without the need for collateral or a third-party guarantee, making it easier for them to upgrade technology and expand production.
• Credit Support During Stress Periods: A dedicated mechanism will be implemented to ensure that MSMEs facing temporary financial strain can maintain bank credit. This support helps businesses continue operations during downturns, safeguarding jobs and preventing defaults.
• Mudra Loans: The maximum limit for Mudra loans under the ‘Tarun’ category is raised from ₹10 lakh to ₹20 lakh for MSMEs with a strong repayment history. This increase allows businesses to access more substantial funds, supporting expansion and job creation[8].

1. E-Commerce Export Hubs:
   • New E-Commerce Export Hubs will be established in partnership with the private sector (PPP mode) to promote MSME and artisan products in international markets. These hubs provide logistics support, marketing, and training, helping small producers and artisans expand globally, reach new customers, and compete internationally.
2. Critical Mineral Mission:
   • Recognizing the importance of critical minerals for industries such as electronics, renewable energy, and defense, this mission focuses on securing a reliable supply chain:

• Domestic Production and Recycling: Encouraging local extraction and recycling of critical minerals reduces dependency on imports and supports industries that rely on these resources.
• Overseas Acquisition: India will pursue partnerships or acquisitions to secure access to mineral reserves abroad, ensuring stability in supply.
• Offshore Mining Auctions: The first tranche of offshore mining blocks will be auctioned for mineral exploration, enhancing self-sufficiency in mineral resources and reducing import reliance[9].

1. Digital Public Infrastructure (DPI):
   • DPI will be developed to support various key services, enhancing digital access, efficiency, and integration across sectors. DPI applications will cover areas such as:

• Credit: Enabling digital lending solutions and expanding credit access.
• E-commerce: Supporting online business growth and facilitating digital marketplaces.
• Education and Health: Offering digital platforms for educational resources and telemedicine, improving accessibility.
• Law and Justice: Streamlining judicial processes and making legal services more accessible.
• Logistics and Urban Governance: Enhancing logistics networks and urban planning, contributing to smarter and more connected cities.

URBAN DEVELOPMENT

The Urban Development priority focuses on creating modern, well-connected cities, affordable housing, and accessible community spaces[10]:

• Transit Oriented Development: Comprehensive plans will be developed for 14 major cities to integrate public transportation with urban planning. This initiative aims to reduce commute times, improve city layouts, and make urban areas more sustainable.
• Urban Housing (PM Awas Yojana Urban 2.0): With an investment of ₹10 lakh crore over five years, this housing initiative focuses on constructing affordable homes for 1 crore urban poor and middle-class families, addressing the increasing demand for housing in growing cities[11].
• Street Markets (Haats): To support local economies and create vibrant community spaces, 100 weekly street markets or food hubs will be established each year for five years. These haats will be spread across selected cities, providing local vendors a dedicated place to sell goods and street food.

ENERGY SECURITY

This priority area targets sustainable energy transition and promotes cutting-edge energy technologies:

• Energy Transition Policy: The government will introduce an energy transition policy to balance the country’s goals of job creation, economic growth, and environmental sustainability. This policy will guide the shift toward cleaner energy sources.
• Pumped Storage Policy: A new policy will promote pumped storage projects to improve energy storage capabilities, helping balance renewable energy supply with demand, and ensuring a steady energy supply.
• Nuclear Energy (Bharat Small Modular Reactors): The government will support research and development of small modular nuclear reactors, partnering with the private sector to advance nuclear technology that provides clean, reliable energy for future needs.
• Hard-to-Abate Industries: For industries that are challenging to decarbonize, the government plans a regulatory shift from the “Perform, Achieve, and Trade” model to the “Indian Carbon Market” mode, setting a pathway to gradually reduce emissions in sectors like steel, cement, and chemicals.

INFRASTRUCTURE

The infrastructure priority focuses on extensive investment to boost connectivity, resilience, and regional development:

• Central Capital Expenditure: An allocation of ₹1 lakh crore (3.4% of GDP) is dedicated to enhancing infrastructure, supporting projects in transportation, communication, and other essential sectors.
• State Infrastructure (Interest-Free Loans): The central government will provide ₹5 lakh crore in interest-free loans to states for infrastructure development, encouraging investment in local projects and regional growth.
• Pradhan Mantri Gram Sadak Yojana (PMGSY) Phase IV[12]: The fourth phase of PMGSY aims to connect 25,000 rural habitations with all-weather roads, reducing isolation for rural communities and facilitating access to markets, healthcare, and education.
• Flood Mitigation: With ₹11,500 crore dedicated to flood protection projects, the government will support regions like Bihar, Assam, Himachal Pradesh, and Sikkim. These projects will focus on irrigation, flood control, and disaster resilience.
• Tourism Development: Investments will enhance prominent tourism sites, such as the Vishnupad and Mahabodhi Temple Corridors, and protect wildlife sanctuaries. This includes projects to improve the infrastructure around natural landscapes and beaches in Odisha, promoting cultural heritage and eco-tourism.

INNOVATION & RESEARCH AND DEVELOPMENT (R&D)

This priority supports India’s shift toward a knowledge-driven economy by promoting R&D across critical sectors and expanding the space industry:

• Anusandhan National Research Fund[13]: This fund will provide financing specifically for basic research and prototype development. By offering financial resources for foundational research, the initiative aims to advance India’s capabilities in science and technology, supporting early-stage innovations that could lead to significant breakthroughs.
• Space Economy Expansion: A ₹1,000 crore venture capital fund will be dedicated to the space sector, targeting a 5x expansion in India’s space economy over the next decade. This fund will support startups, private companies, and innovative projects that contribute to satellite technology, space exploration, and commercial space ventures, positioning India as a competitive player in the global space market.

NEXT-GENERATION REFORMS

Next-gen reforms focus on modernizing land records, enhancing labor services, and introducing new financial planning tools:

• Rural Land Actions: To streamline land ownership records and facilitate rural development, Unique Land Parcel Identification Numbers (ULPINs), or “Bhu-Aadhaar,” will be assigned to all rural lands. This includes digitization of cadastral maps and linking land records to the farmers’ registry for a transparent and accessible land management system. The reforms aim to improve land-use planning, prevent disputes, and assist with agricultural subsidies and loans.
• Urban Land Actions: In urban areas, the focus will be on digitizing land records with GIS mapping for accurate and accessible data. This will simplify property ownership verification, reduce fraud, and improve urban planning, supporting efficient governance in urban areas.
• Labor Services: Integrating the e-shram portal with other platforms will create a one-stop solution for laborers, offering information on job openings, skill training, and welfare schemes. This platform will help connect job seekers with employers and skill providers, streamlining workforce development.
• NPS Vatsalya: The NPS Vatsalya plan allows parents and guardians to contribute to the National Pension System (NPS) on behalf of minors, enabling early financial planning and savings for children. This initiative provides a structured way for families to build a secure financial future for their children through long-term investments[14].

PRIORITIES ON INDIRECT TAXES:

• Digital Taxpayer Services: Full digitalization of Customs and Income Tax services over the next two years, including rectifications and appellate order processing.

This transition aims to modernize tax administration by enabling online processes for rectifications and the processing of appellate orders. By moving to a fully digital framework, the government seeks to enhance efficiency, reduce processing times, and improve user experience for taxpayers, making it easier for them to access and manage their tax-related services. [15]

DISPUTE RESOLUTION AND LITIGATION:

• Vivad Se Vishwas Scheme 2024: Aimed at resolving income tax disputes in appeal[16].
• Increased monetary thresholds for filing tax appeals in Tax Tribunals, High Courts, and the Supreme Court, set at ₹60 lakh, ₹2 crore, and ₹5 crore, respectively.
• Expansion of safe harbour rules to reduce international tax disputes.
• This adjustment aims to reduce the caseload on judicial bodies and minimize legal expenses for taxpayers, thereby making the appeals process more accessible .

INVESTMENT AND EMPLOYMENT INITIATIVES

The Finance Bill 2024 includes several key initiatives to enhance investment and boost employment, particularly in the startup ecosystem. One of the most significant changes is the abolition of the “angel tax” for all classes of investors, a move aimed at fostering a more supportive environment for startups. This tax, which previously targeted high-net-worth individuals investing in unlisted companies, has been seen as a barrier to investment. By removing it, the government seeks to encourage more capital inflow into innovative ventures simplified tax regime for foreign shipping companies operating domestic cruises is introduced to promote cruise tourism in India. This initiative aims to attract more international players to the Indian market, thereby enhancing the tourism sector. New safe harbour rates for foreign mining companies are also established, providing clarity and reducing potential tax disputes . Furthermore,  for foreign companies  is reduced from 40% to 35%, making India a more attractive destination for foreign investment .[17]

BROADENED TAX BASE

To increaent revenue, the Finance Bill proposes an increase in the Security Transactions Tax (STT) on futures and options trading to 0.02% and 0.1%, respectively. This adjustment reflects an effort to expand the tax base while capitalizing on the growing financial market activities . Additionally, income received from share bll now be taxed at the recipient’s level, ensuring that investors contribute fairly to the tax system .

SOCIAL SECURITY BENEFITS

The Finance Bill 202asures to enhance social security for employees. The deduction for employer contributions to the National Pension System (NPS) is increased from 10% to 14% of the employee’s salary. This move aims to strengthen the retirement savings of employees, providing them with a more secure financial future . Moreover, the government has decided to depanelize the non-reporting movable foreign assets valued up to ₹20 lakh, thereby easing compliance burdens for taxpayers .

OTHER FINANCE BILL PROPOSALS

One noteworthy proposal in the Finance Bill of the 2% equalization levy. This levy was initially imposed on foreign companies providing digital services in India, and its removal signals a shift towards a more simplified tax structure for international businesses operating in the digital space. This change is expected to enhance India’s attractiveness as a market for global tech firms and streamline compliance requirements .

CONCLUSION:

The 2024 tax reforms mark a pivotal shift towards enhancing transparency, efficiency, and compliance within India’s tax system, supporting both economic growth and taxpayer ease. Key highlights include the digitalization of tax processes, reduction of corporate tax for foreign companies, and expanded thresholds for tax appeals, all aimed at reducing litigation and streamlining the tax framework. Improving compliance has been approached through simplified tax processes and taxpayer assistance programs. Initiatives include real-time reporting requirements for businesses, especially those in e-commerce and digital services, and targeted outreach to high-risk sectors. Penalty structures have also been revised, with some jurisdictions focusing on offering reduced penalties or amnesties to incentivize voluntary compliance.

REFERENCES

• https://www.grantthornton.in/insights/media-articles/union-budget-2024-beginning-of-remarkable-direct-tax-reforms-by-modi-3.0/
• https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2035609
• https://assets.ey.com/content/dam/ey-sites/ey-com/en_in/topics/tax/union-budget/2024/ey-union-budget-2024-key-highlights.pdf
• https://kpmg.com/in/en/home/services/tax/india-union-budget-2024-25.html
• https://static.pib.gov.in/WriteReadData/specificdocs/documents/2024/jul/doc2024723352601.pdf
• https://cleartax.in/s/income-tax-changes-from-april-2024
• https://www.oecd.org/en/publications/tax-policy-reforms-2024_c3686f5e-en.html
• https://www.taxathand.com/article/36950/OECD/2024/2024-report-on-tax-policy-reforms-released

[1] OECD, Tax Policy Reforms 2024: OECD and Selected Partner Economies (2024)

[2] Economic Times, India’s 2024 Tax Reforms Focus on Digital Compliance & Evasion Reduction, Oct. 2024.

[3] https://wdcw.ap.gov.in/

[4] Rahul Jain, Digital-Driven Tax Reforms for a Modern Economy, Financial Express, 2024.

[5] Riaz Thingna, Union Budget 2024: Beginning of Remarkable Direct Tax Reforms by Modi 3.0, Grant Thornton Bharat (2024)

[6] https://financialservices.gov.in/beta/en

[7] https://www.pmindia.gov.in/en/news_updates/cabinet-approves-pradhan-mantri-janjatiya-unnat-gram-abhiyan/

[8] https://www.mudra.org.in/

[9] https://mines.gov.in/webportal/home

[10] Adil Zaidi, Union Budget 2024: How Modi 3.0 May Double Down on Urban Development Amid Viksit Bharat Ambitions, ET Contributors (July 18, 2024).

[11] https://pmay-urban.gov.in/

[12] https://pmgsy.nic.in/node/26

[13] https://serb.gov.in/

[14] https://npstrust.org.in/

[15] Ayush Mishra, Union Budget 2024-25: Key Tax Reforms and Changes. Business Standard, 2024.

[16] https://www.indiafilings.com/learn/vivad-se-vishwas-2024/

[17] Krishan Arora, Karan Kakkar & Devika Dixit, Union Budget 2024-25: Propelling India’s evolution into ‘Viksit Bharat’, Business Standard (Jul. 24, 2024)