Today, on July 23rd, 2024, India awaits the unveiling of the Union Budget by Finance Minister Nirmala Sitharaman. This annual event marks a critical juncture, shaping the nation’s economic trajectory for the upcoming fiscal year. With high expectations and careful consideration, the budget will outline the Indian government’s plans for revenue generation, expenditure allocation, and strategic reforms.
This year’s budget is particularly significant as it falls under the purview of the Modi government’s third term. It will be interesting to see how the government balances fiscal prudence with the aspirations of a growing economy. Key areas to watch include potential changes in tax slabs, infrastructure spending plans, and initiatives to boost growth and social welfare.
Stay tuned for live updates and analysis as we delve deeper into the details of the Union Budget 2024. This day promises to illuminate the government’s vision for India’s economic future.
Explore the key highlights and updates from the Union Budget 2024 presented on July 23, 2024. This article delves into the major announcements made by Finance Minister Nirmala Sitharaman, focusing on the “Viksit Bharat” theme aimed at fostering inclusive development. Learn about the budget’s implications for various sectors, including welfare schemes, tax reforms, and capital expenditure initiatives, as the government outlines its financial plans for the upcoming fiscal year. Stay informed on how these changes may impact the economy and citizens alike.
Union Budget 2024 Highlights
- Finance Minister Nirmala Sitharaman will present the Union Budget 2024 in Parliament on July 23, 2024, at 11 AM. This marks her seventh consecutive budget presentation, making her the first finance minister to achieve this milestone.
- In the new tax regime, the tax rate structure will be revised. Below is the new structure:
0-3L Zero
3-7L 5%
7-10L 10%
10-12L 15%
12-15L 20%
15 & above, 30% - Capital Expenditure: The budget retains ?11.11 lakh crore for capital expenditure, which is 3.4% of India’s GDP. This includes significant allocations for infrastructure projects, including railways and urban development
- Income Tax: No changes in tax rates were made, but the standard deduction under the new tax regime has been increased from ₹50,000 to ₹75,000. The tax rate structure for incomes has been revised, with the highest rate remaining at 30% for incomes above ₹15 lakh
- Also, the 20% TDS on repurchase by MF or UTI was proposed to be withdrawn.
- Customs Duty: The Basic Customs Duty on mobile phones and related components has been reduced to 15%. The customs duty on gold, silver, and platinum has also been lowered
- Revised Long-Term Capital Gains Tax: The long-term capital gains (LTCG) tax rate has been modified, increasing from 10% to 12.5%. This change will affect investors holding assets for longer periods, as they will now face a higher tax on gains realized from the sale of these assets. Also, has the capital gains exemption limit been set at 1.25 lakh per year?
- Short-Term Capital Gains Tax Increase: The short-term capital gains tax has also seen an increase from 15% to 20%. This adjustment impacts investors who sell assets within a year, resulting in a higher tax liability on their profits.
- Securities Transaction Tax (STT): The STT rate on Futures and Options (F&O) trades has been doubled from 0.01% to 0.02%. This will increase the transaction costs of traders in the derivatives market.
- Angel Tax: The most notable change is the complete abolition of the angel tax for all classes of investors. This tax, which was imposed on funds raised by startups exceeding their fair market value, has been a major concern for Indian entrepreneur and investors alike. The removal of this tax is expected to alleviate the financial burden on startups, encouraging more investments and fostering innovation within the ecosystem
- Simplified Tax Regime for Domestic Cruise Operations: The budget proposes a simpler tax regime for foreign shipping companies operating domestic cruises. This initiative aims to enhance the cruise tourism sector in India, which has significant potential for growth and job creation
- Safe Harbour Rates for Foreign Mining Companies: To support the diamond cutting and polishing industry, the budget includes provisions for safe harbour rates for foreign mining companies selling raw diamonds. This move is designed to promote the industry and ensure fair taxation practices, which can help attract foreign investment
- Reduction in Corporate Tax Rate for Foreign Companies: The corporate tax rate for foreign companies has been reduced from 40% to 35%. This reduction is intended to make India a more attractive destination for foreign investment, thereby boosting economic growth and development
- Customs Duty Adjustments: To support the capital market indirectly, the budget includes reductions in customs duties on various sectors, such as mobile phones and components, and on gold, silver, and platinum. These changes are aimed at fostering domestic manufacturing and reducing input costs for businesses
- PM Package for Employment: Introduction of a PM Package with five schemes focused on boosting employment and skilling, with an allocation of ₹2 lakh crore. This includes direct benefit transfers for new hires and incentives for employers to create new jobs
- Women’s Empowerment: Over ₹3 lakh crore has been allocated for schemes benefiting women and girls, including setting up hostels and creating women-specific skilling programs
- Agriculture and Rural Development: ₹1.52 lakh crore will be allocated to agriculture and allied sectors, focusing on productivity and climate-resilient varieties. Additionally, ₹2.66 lakh crore will be allocated for rural development initiatives
- Customs Duty: The Basic Customs Duty on mobile phones and related components has been reduced to 15%. The customs duty on gold, silver, and platinum has also been lowered
- Railways: The budget includes plans to convert 40,000 rail bogies to Vande Bharat coaches, enhancing the safety and comfort of passengers. Three major railway corridors have also been announced to improve logistics and passenger train operations
- Aviation Sector: The number of airports has doubled, and Indian carriers have ordered over 1000 new aircraft. A high-powered committee will be formed to address challenges arising from demographic changes
- Support for MSMEs and Startups: The budget emphasizes support for micro, small, and medium enterprises (MSMEs) and includes the abolition of the Angel Tax, which is expected to boost the startup ecosystem
- Fiscal Deficit: The fiscal deficit target for FY25 is set at 5.1% of GDP, with a goal to reduce it to below 4.5% by FY26. This focus on fiscal responsibility is intended to attract foreign investment and improve economic stability
- Tax Deducted At Source (TDS) Framework
- E-commerce Operators: The TDS rate for e-commerce operators has been reduced from 1% to 0.1%. This reduction aims to simplify the tax compliance process for digital platforms and their sellers
- TCS Credit for Salaries: Credit for Tax Collected at Source (TCS) is now allowed to be given in the TDS deducted on salaries. This change addresses the issue where employees faced cash flow challenges due to TCS on remittances exceeding Rs. 7 lakhs. This adjustment will take effect from October 1, 2024, allowing taxpayers to benefit in the financial year 2024-25
- Reduction of TDS Rate: The TDS rate has been reduced from 5% to 2% for various payments. This change is intended to ease the tax burden on individuals and businesses, making it more manageable for taxpayers
- New TDS Provisions for Partners: A new provision has been introduced for TDS on payments made to partners in a partnership firm. If the total payments to partners exceed 20,000 in a financial year, a TDS of 10% will be applicable. This provision will come into effect from April 1, 2025
- Clarification on TDS for Property Sales: The budget clarified that TDS under Section 194-IA will now apply based on the aggregate sale consideration of immovable property. If the total sale consideration exceeds ?50 lakh, TDS will be applicable, regardless of how the payment is split among multiple buyers or sellers. This change aims to prevent tax avoidance strategies that previously exploited the individual payment limits.
- Decriminalization of TDS Delays: Delay in payment of TDS up to the due date of filing the statement for the same has been decriminalized. This move aims to reduce the burden on taxpayers and simplify compliance.
- Digitalization and Simplification: All major taxpayer services under GST and most services under customs and income tax have been digitalized. The budget proposes to extend this digitalization to remaining services, making the tax administration more efficient and user-friendly over the next two years
- Reduction in Customs Duties on Precious Metals: The customs duty on precious metals, including gold and silver, has been reduced to 6%. This reduction is expected to lower the cost of these metals, making them more accessible to consumers and potentially boosting the jewelry and investment sectors.
- Customs Duty on Mobile Phones and PCBA: The customs duty on mobile phones and Printed Circuit Board Assemblies (PCBA) has been decreased to 15%. This move aims to support the domestic electronics manufacturing industry by making components cheaper, which could reduce consumer prices and increase manufacturers’ production capabilities.
- Exemption of Customs Duties on Cancer Medicines: The budget announced the full exemption of customs duties on three additional cancer medicines. This initiative is part of the government’s commitment to improving healthcare access and affordability for critical treatments, particularly for cancer patients.
- Simplification of Customs Procedures: The budget emphasizes simplifying customs procedures to facilitate smoother trade operations. This includes measures to reduce bureaucratic hurdles and enhance efficiency in customs clearance processes.
- Support for Renewable Energy and Climate Action: While specifics on customs duties related to renewable energy were not detailed, the budget indicates a broader commitment to climate action. This may involve potential reductions or exemptions on customs duties for components related to renewable energy technologies, supporting India’s transition to sustainable energy sources.
- Focus on Mining Sector: The budget also includes provisions for safe harbour rates for foreign mining companies selling raw diamonds, which will likely encourage investment in the mining sector and enhance India’s position in the global diamond market.
- Five New Employment Schemes:
- First-Time Employment Support: This scheme encourages first-time employment by providing a one-month salary of up to 15,000 to new employees registered in the Employees’ Provident Fund Organisation (EPFO). Payments will be made in three instalments to support their transition into the workforce.
- Job Creation in Manufacturing: Incentives will be provided to employers based on their EPFO contributions for hiring new employees, aiming to stimulate job growth in the manufacturing sector.
- Employer Support and Employment Generation: The government will reimburse up to 3,000 per month for two years towards EPFO contributions for each additional employee hired, reducing the financial burden on employers.
- Centrally Sponsored Skilling Scheme: This initiative aims to skill 20 lakh youth over five years in collaboration with state governments and industries, enhancing their employability.
- Internship Scheme: The government plans to provide internships for 1 crore youth in 500 top companies over five years, allowing them to gain practical experience and enhance their job prospects.
- Direct Benefit Transfers (DBT) for New Hires: New hires will receive up to 15,000 indirect benefit transfers (DBT) in three instalments, with a monthly salary cap of 1 lakh. This initiative targets 2.1 lakh youths
- Support for Higher Education: The budget proposes financial support for student loans of up to 10 lakh for higher education in domestic institutions. E-vouchers will be provided to 1 lakh students each year for interest subvention of 3%
- Focus on Women and Marginalized Groups: There is a strong emphasis on supporting women, youth, and marginalized groups through various schemes aimed at enhancing their participation in the workforce
- Long-Term Vision for Employment: The initiatives reflect a long-term vision to empower approximately 4.1 crore young individuals over the next five years, enhancing their skills and job prospects in a rapidly changing economy
- Establishment of Working Women Hostels: To facilitate higher participation of women in the workforce, the government plans to set up working women hostels in collaboration with industries. This initiative aims to provide safe and affordable accommodation for working women, addressing a significant barrier to employment.
- Creche Facilities: The budget also includes provisions for establishing creche facilities. These facilities will help working women manage their responsibilities by providing childcare support, enabling them to balance work and family life more effectively
- Market Access for Women-Led SHGs: The budget promotes market access for women-led Self-Help Groups (SHGs). This initiative aims to empower women entrepreneurs by providing them with better opportunities to market their products and services, thus enhancing their economic independence.
- Women-Specific Skilling Programs: The government will launch women-specific skilling programs to enhance women’s employability. These programs equip women with the necessary skills to enter and thrive in the workforce, promoting gender diversity in various sectors.
- Simplification of GST Compliance: The budget emphasizes the digitalization of major taxpayer services under GST, customs, and income tax to streamline the compliance process. All remaining services under customs and income tax, including rectification and order giving effect to appellate orders, will be digitalized over the next two years.
- Amendments to Facilitate Trade: Several critical amendments have been introduced to the GST laws to facilitate trade:
Exclusion of Extra Neutral Alcohol: Extra Neutral Alcohol used in the manufacture of liquor will be excluded from the central tax purview, along with similar amendments proposed in the IGST and UTGST Acts.
New Section 11A: This new provision will enable the government to regularize non-levy or short levy of central tax due to prevalent trade practices. - Enhanced Input Tax Credit Provisions: Significant changes have been made to input tax credit (ITC) provisions:
The time limit to avail of ITC has been extended by inserting two new subsections to Section 16 of the CGST Act.
A common time limit for issuing demand notices and orders has been established.
The timeframe for taxpayers to benefit from a reduced penalty by paying the demanded tax along with interest has been increased from 30 days to 60 days. - Eased Pre-Deposit Requirements: To ease the process for businesses, the budget includes:
A reduction in the maximum amount of pre-deposit required for filing an appeal with the Appellate Authority from 25 crore to 20 crore.
For appeals filed with the Appellate Tribunal, the pre-deposit amount has been reduced from 20% (maximum 50 crore) to 10% (maximum 20 crore) of central tax.
The time limit for filing appeals before the Appellate Tribunal will also be modified to prevent delays from causing appeals to become time-barred. - Bihar Package
- Bihar
Allocation of Rs 26,000 crore for developing road connectivity projects, including the Patna-Purnia Expressway, Buxar-Bhagalpur Expressway, and an additional two-lane bridge over the Ganga in Buxar - Support for setting up a new 2400 MW power plant at Pirpainti in Bhagalpur district at Rs 21,400 crore
- Plans for new airports, medical colleges, and sports infrastructure in Bihar
- Additional allocation to support capital investments and expedited requests for external assistance from multilateral development banks
- Support for comprehensive development of the Vishnupad Temple Corridor and Mahabodhi Temple Corridor, modelled on the booming Kashi Vishwanath Temple Corridor, to transform them into world-class pilgrim and tourist destinations
- Bihar to be included under the ‘Purvodaya’ project for all-round development, focusing on human resource development, infrastructure enhancement, and economic opportunity generation
- Bihar
- Andhra Pradesh Package:
The government will allocate 15,000 crore for the current financial year, with assurances of additional funds in subsequent years. This support is aimed at fulfilling commitments outlined in the Andhra Pradesh Reorganisation Act and facilitating development in the state, particularly for crucial projects like the Polavaram irrigation project, which is vital for food security and agricultural sustainability in the region.- Allocation of Rs 15,000 crore for the new capital of Andhra Pradesh in the current financial year, with assurances of further funds in subsequent years
- Commitment to financing and early completion of the Polavaram Irrigation Project called the lifeline for Andhra Pradesh and its farmers
- Funds for essential infrastructure such as water, power, railways and roads in the Kopparthy node on the Vishakhapatnam-Chennai Industrial Corridor and the Orvakal node on the Hyderabad-Bengaluru Industrial Corridor
- Additional allocation towards capital investment for economic growth and grants for backward regions of Rayalaseema, Prakasam and North Coastal Andhra, as stated in the Andhra Pradesh Reorganisation Act
- Political Context: The announcement is seen as a strategic move to strengthen coalition politics, particularly with the Telugu Desam Party (TDP), which has been a key ally of the ruling National Democratic Alliance (NDA) government.
- Vishnupad Temple Corridors: The government will undertake comprehensive development of the Vishnupad Temple corridor and the Mahabodhi Temple corridor. This initiative is modelled on the successful Kashi Vishwanath Temple Corridor project and aims to transform these sites into world-class pilgrim and tourist destinations. These initiatives are modeled after the successful Kashi Vishwanath Temple Corridor project, aiming to transform these sites into world-class pilgrimage and tourist destinations
- Rajgir Development: The budget also includes a comprehensive development initiative for Rajgir, which is significant for Hindus, Buddhists, and Jains. This includes plans to revive Nalanda University and develop Nalanda as a tourist center
- Support for Nalanda: The budget includes plans to develop Nalanda as a tourist center and revitalize Nalanda University, further promoting the region’s historical and cultural significance
- Tourism Development in Odisha: The government will provide assistance for tourism development in Odisha, which is known for its scenic beauty, temples, craftsmanship, wildlife sanctuaries, and pristine beaches. This initiative aims to boost tourism in the region
- Increased Budget for Tourism Ministry: The total allocation for the Union Tourism Ministry has been marginally increased to ?2,449 crore for 2024-25, up from ?2,400 crore in the previous year. This funding is intended to enhance employment and stimulate tourism growth across the country
- Pradhan Mantri Surya Ghar Muft Bijli Yojna: This flagship scheme aims to provide subsidized rooftop solar installations to 10 million households, with an allocation of nearly 10,000 crore, significantly up from ?4,970 crore last year. The scheme offers 300 units of free electricity per month, and it has already seen over 1.28 crore registrations and 14 lakh applications
- Nuclear Energy Development: The budget outlines plans to develop small modular nuclear reactors (SMRs) as part of India’s energy mix. The government will collaborate with the private sector for the establishment and research of these reactors, which are expected to enhance energy security and efficiency
- Advanced Ultra Super Critical (AUSC) Thermal Power Plants: The budget reaffirms the commitment to developing AUSC technology, which improves coal efficiency. A joint venture between NTPC and BHEL will establish an 800 MW plant using this technology, supported by government funding for necessary materials
- Energy Storage and Efficiency
- Pumped Storage Policy: A new policy will be introduced to promote pumped storage projects, facilitating the integration of renewable energy sources into the grid. This approach is crucial for managing the intermittent nature of renewable energy.
- Support for Micro and Small Industries: The budget includes plans for investment-grade energy audits in traditional industries to aid their transition to cleaner energy sources. Financial support will be provided to implement energy efficiency measures across 60 clusters, with plans to expand this initiative to 100 more
- PM Kisan Samman Nidhi: The allocation for this scheme remains at ₹60,000 crore, providing direct financial assistance to 11.8 crore marginal and small farmers. This scheme aims to enhance farmers’ income stability and support their financial needs.
- Pradhan Mantri Fasal Bima Yojana (PMFBY): The crop insurance scheme continues with a focus on increasing its reach and effectiveness. It aims to protect around 4 crore farmers from adverse weather conditions and other unforeseen events by enhancing awareness and accessibility of crop insurance.
- Integration of Mandis into e-NAM: The digital transformation of India’s agricultural markets is emphasized by integrating 1,361 mandis into the electronic National Agricultural Market (e-NAM). This integration aims to increase trading volumes and provide a more efficient and transparent market system for 1.8 crore farmers.
- Post-Harvest Infrastructure: To reduce post-harvest losses, which amount to significant financial losses annually, the budget emphasizes public-private partnerships to improve infrastructure and storage facilities. This initiative aims to enhance food security and drive economic growth by minimizing losses.
- Atmanirbhar Oil Seeds Abhiyan: This initiative focuses on achieving self-sufficiency in edible oils by promoting research and development of indigenous oilseeds. It includes developing high-yielding varieties, modern farming techniques, and robust market linkages to reduce dependency on imports
- Nano DAP Adoption: Following the successful adoption of Nano Urea, the budget proposes the adoption of Nano DAP, a cost-effective and efficient fertilizer, across various climatic zones to reduce import dependency and improve agricultural productivity
- Dairy Development Program: With an allocation of ₹29,610.25 crore over three years, this program aims to enhance dairy processing, product diversification, and infrastructure development. It seeks to improve productivity and control diseases in the dairy sector
- Aquaculture Boost: The budget aims to increase aquaculture productivity by establishing integrated aquaparks under the PM-Matsya Sampada Yojana. The goal is to double exports and create job opportunities for 55 lakh people
Resources
- Finance Bill https://www.indiabudget.gov.in/doc/Finance_Bill.pdf
- Budget Speech https://www.indiabudget.gov.in/doc/Budget_Speech.pdf
- Key to budget documents https://www.indiabudget.gov.in/doc/Key_to_Budget_Document_2024.pdf