Budget 2024 Highlights: Nirmala Sitharaman presents Interim Budget 2024

Indirect taxes play a significant role in India‘s tax system, impacting various sectors of the economy. Here are seven commonly imposed indirect taxes in the country – Service Tax, Excise Duty, Value Added Tax (VAT), Customs Duty, Securities Transaction Tax (STT), Stamp Duty and Entertainment Tax.

Indirect taxes, as the name suggests, are not imposed directly on taxpayers. Instead, they are levied on goods and services, ultimately leading to increased prices for consumers. In India, some common examples of indirect taxes include service tax, central excise and customs duty, and value-added tax (VAT).

Anubhuti Sharma, Founder, Impresario Global says that in recent years, the perception of social impact has evolved from being solely a charitable responsibility to a recognized avenue for sustainable growth and investment. Sharma says that the interim budget is expected to witness increased allocations for digital inclusion, social impact initiatives, and sustainable practices. This transformation is facilitated through Public-Private-Philanthropic-Partnerships (PPPPs), emphasizing capacity building within local communities. Tstreamlining processes by eliminating unnecessary complexitieso catalyze the PPPP industry, the government can support financing and risk mitigation through blended funding mechanisms, introduce tax incentives for impact investments, and encourage models of public-private risk-sharing. She further adds that streamlining processes by eliminating unnecessary complexities, prioritizing sustainable contributions from small ventures, encouraging continual upskilling within impact industries for the younger demographic, and incentivizing companies to surpass mandatory CSR spending are measures that can contribute to building a thriving circular ecosystem for PPPPs.

President Droupadi Murmu emphasized on Wednesday that the government is actively working to enhance the profitability of agriculture and is committed to people-centric development, reported ANI. Speaking at the joint sitting of Lok Sabha and Rajya Sabha in the newly inaugurated Parliament building, President Murmu expressed the government’s belief that the foundation of New India‘s magnificent growth rests on the pillars of youth power, women, farmers, and the poor. She highlighted that Rs 2.80 lakh crore has been disbursed to farmers through the Pradhan Mantri Kisan Samman Nidhi Yojana. Over the past decade, there has been a three-fold increase in accessible loans for farmers from banks, she noted.

President Murmu underscored that welfare schemes are not merely facilities for citizens but have significantly impacted people’s lives. She observed that the achievements witnessed today are the result of practices initiated over the last ten years, emphasizing the positive impact on poverty alleviation. Acknowledging the strength of ‘Make in India‘ and ‘Aatmanirbhar Bharat,’ the President commended the defense production for surpassing the Rs 1 lakh crore mark. She characterized the past year as one of historic achievements for the country.

Investors and consultants aligned in their collective appeal to Finance Minister Nirmala Sitharaman on February 1, urging attention to various tax-related issues. Expectations range from addressing angel tax and rationalizing capital gains tax to refining tax on ESOPs, introducing tax holidays, and more. Experts anticipate that the upcoming budget for 2024 will enhance the current investment climate for startups and emerging businesses through comprehensive tax reforms.

Read More Here: From Angel tax to tax on ESOPs; tax reforms a key ask from startup VCs, consultants

President Droupadi Murmu informed Parliament that India effectively managed inflation, preventing an additional burden on its citizens. Despite facing global challenges such as two wars and the Covid-19 pandemic in recent years, the government maintained control over inflation nationwide, ensuring that the people were not unduly burdened, as stated in her address to the joint sitting of Parliament. As of December 2023, retail inflation in India stood at 5.69 percent, within the RBI‘s 2-6 percent comfort range but exceeding the preferred 4 percent scenario.

Anshoo Sharma, CEO & Co-founder of Magicpin applauds the government’s forward-looking digital initiatives and anticipates a progressive policy framework that encourages startup-friendly activities in the upcoming budget. Given the current economic momentum, Sharma says that there is a pressing need for on-the-ground transformations, emphasizing extensive, progressive, and economy-friendly investments. The retail sector, which constitutes 10% of our GDP, is eagerly anticipating the draft National Retail Policy. She said that this policy should address aspects such as access to credit, streamlined licensing practices, infrastructure development, and improved employment opportunities, especially for MSMEs and small retailers.

Sharma also said that the rationalization of GST will play a crucial role in increasing disposable income for consumers, thus boosting demand. In related sectors like logistics, strengthening the National Logistics Policy (NLP) will streamline operations and encourage private sector investments, particularly in strengthening last-mile connectivity. Digital commerce initiatives like UPI, Rupay credit cards, and ONDC have already paved the way for business ease, Sharma said.

Direct tax is a levy paid directly by individuals or organizations to the government, calculated on their earnings. If an individual has generated income, they are obligated to pay this tax – a straightforward principle.

– Projected to exceed a GDP growth rate of 7.2 percent in FY24, India is outpacing the global economy, which struggles to achieve a growth rate exceeding 3 percent.

– Ranking third globally in fintech economy size, India follows the USA and the UK in this thriving sector.

– The PM Jan Dhan Yojana has significantly increased the percentage of women holding bank accounts, rising from 53 percent in 2015-16 to 78.6 percent in 2019-21.

– Over the years, the Gross Enrolment Ratio (GER) for females in higher education has witnessed a fourfold increase, climbing from 6.7 percent in FY01 to 27.9 percent in FY21.

– With a surge in public sector capital investment over the past decade, a healthy financial sector, and robust non-food credit growth, the Indian economy is experiencing rapid growth.

– Structural reforms implemented since 2014 have fortified the macroeconomic fundamentals of the economy.

– Effective Covid management, well-devised stimulus measures, and the highly successful vaccination campaign have steered the economy back onto a high-growth trajectory.

– A steadfast commitment to ensuring steady economic growth is generating resources for necessary investments in climate change adaptation, resilience building, and emissions mitigation.

In the Union Budget for 2022-23, the government declared its intention to issue sovereign Green Bonds as part of its overall market borrowings for the fiscal year. These bonds aim to generate funds for green infrastructure projects, with the proceeds dedicated to sector projects that contribute to lowering the carbon intensity of the economy. In alignment with this budgetary announcement, the Government of India has introduced a framework for Sovereign Green Bonds to raise funds for green infrastructure initiatives, thereby contributing to the reduction of carbon intensity in the economy.

This year, the absence of a full-fledged Budget session has led to the decision not to present the Economic Survey on January 31.

Given the interim nature of the budget and the upcoming Lok Sabha elections scheduled for April-May, no significant policy announcements or changes are anticipated on February 1.

A comprehensive budget and the Economic Survey are likely to be presented in July, following the election results and the formation of a new cabinet. Instead of the Economic Survey, the Ministry of Finance released a report titled “Indian Economy – A Review” on January 29.

The interim report ‘Indian Economy – A Review,’ prepared by the Economic Affairs Department of the Finance Ministry, emphasized that India‘s growth is expected to surpass the global economy in the next fiscal year.

The Economic Survey, conventionally disclosed a day before the Union Budget, offers a thorough examination of the Indian economy‘s performance in the preceding fiscal year along with future insights. Presented by the Chief Economic Advisor (CEA) on the eve of the Budget presentation, the survey sheds light on the effectiveness of the previous budget and offers insights into potential developments for the Indian economy.

In its assessment of the Indian economy, the Ministry of Finance has highlighted India‘s remarkable achievement in transforming significant disadvantages into strengths over the past decade. The likelihood of such success was initially perceived as slim, but the government has defied those expectations. In the past nine years, India has not only experienced macro-level growth but has also made concerted efforts to ensure that every Indian citizen becomes both a beneficiary and a catalyst for the nation’s economic success.

Former NITI Aayog vice chairman Rajiv Kumar emphasized on Wednesday that the government should maintain its focus on capital expenditure in the upcoming interim budget, reported PTI. He highlighted that private investment is still weak, and there is a crucial need to address the infrastructure gap, which has been a persistent issue affecting the Indian economy. Kumar pointed out that the increase in capital expenditure during the Modi government’s tenure has yielded positive results, contributing to the improved quality of infrastructure. This enhancement is essential for making the Indian industry more competitive on the global stage. He noted that due to the rise in indirect tax revenues and the broadening of the direct tax base, the finance minister is likely to achieve fiscal consolidation targets.

Prime Minister Narendra Modi spoke to the press ahead of the Budget session, emphasizing that this would be an interim budget while also questioning the conduct of opposition MPs in the previous session. During his customary interaction with the media outside the Parliament building before the Budget Session, the Prime Minister began and concluded his address with the greeting ‘Ram Ram.’ Acknowledging the display of Nari Shakti during this year’s Republic Day celebrations, the Prime Minister highlighted that the Budget session, inaugurated today with President Droupadi Murmu’s address, is a celebration of Nari Shakti.

As Finance Minister Nirmala Sitharaman prepares to present the interim Budget for the fiscal year 2024-25 on February 1, 2024, economists predict that despite it being a vote on account, the government will persist in focusing on fiscal consolidation, easing business and taxation laws, infrastructure development, support for MSMEs, and financial inclusion. Suman Chowdhury, Chief Economist and Head-Research at Acuité Ratings & Research, mentioned, “Considering the expected emphasis on fiscal consolidation in the upcoming budget, we anticipate limited fiscal stimulus. However, a substantial allocation for capital expenditure, with a projected 15% growth, is likely, serving as a key driver of the domestic economy in the medium term.”

Economists suggest that the government is likely to continue implementing various measures from previous budgets to sustain economic growth and generate employment opportunities.

In line with leading global counterparts like the United States with a budget of $62 billion, the Space Industry Association – India (SIA-India) has put forth a Pre-Budget Memorandum for the FY 2024-25, proposing a significant increase in India’s space budget, currently standing at approximately $1.4 billion.

This strategic proposal aims to bolster India’s expanding space program, encourage private sector participation, drive technological advancements, and position the nation as a prominent player in the dynamic global space ecosystem. As highlighted in an official statement from SIA-India, the proposal underscores the importance of allocating ample resources for an effective cybersecurity system to safeguard valuable space assets.

As the Union Budget 2024 approaches, the chemical industry is advocating for tax reforms and technological assistance to sustain its growth. Additionally, given the ongoing geopolitical crisis in Europe and the Middle East, the industry’s wishlist includes relief in freight services through the Red Sea and anti-dumping measures to counter the influx of cheaper products from countries like China, Korea, and Thailand into the Indian market.

Read More Here: Chemical industry looking for tax reforms and tech support

Mr. Vinet Kuumar, CEO, ThoughtSol Infotech Pvt. Ltd. on IT skill development says that the forthcoming Union Budget 2024, particularly in its approach to the IT sector, will have a strong focus on the financial aspect. Kuumar added that he anticipates a budget that underscores the pivotal role of technology in shaping our economic landscape. Strategic allocations are expected to propel digital innovation, bolster cybersecurity, and foster research and development. The budget for the IT sector is designed not only to stimulate sectoral growth but also to cultivate a skills development ecosystem, resulting in a workforce ready for the future. He further adds that as technological advancements accelerate, the 2024 budget is not only viewed as a fiscal blueprint but also as an accelerator, propelling the IT sector toward sustainable excellence and global competitiveness.

Lalit Mehta, Co-Founder and CEO, Decimal Technologies on Digital Infrastructure says that the strategic emphasis on AI integration and digital infrastructure in the Interim Budget 2024 sets the stage for progress. A dedicated AI mission and financial allocation for revitalizing sectors such as agriculture and healthcare research are notable features. The public-private collaboration aims to expedite innovation by sharing costs and facilitating swift progress. Mehta says that the spotlight is on applied artificial intelligence (AI), optimizing infrastructure monitoring and financial processes. The expansion of national high-speed Internet access is part of the digital initiative, supported by robust cybersecurity and data governance to ensure ethical usage. He further adds that the budget places importance on AI expertise through a national skill program that promotes collaboration between academia and business, while also fostering support for AI startups. Tax incentives for AI adoption and advocacy for open-source AI contribute to encouraging innovation and inclusivity. This comprehensive strategy actively seeks to shape change rather than merely predict it.

Avneet Singh Marwah, CEO, Super Plastronics Pvt Ltd says that the upcoming financial budgets play a pivotal role in sustaining India‘s position as the 5th largest economy globally. With India contributing $3.4 trillion to the $104 trillion global economy and boasting the highest young population, maximizing this potential requires a focus on supporting consumption. In alignment with the robust GST trend, there is an expectation of reducing the GST on LED TVs larger than 32 inches from 28% to 18% in Budget 2024. To foster market growth, Public-Private Partnership (PLA) schemes should be extended to encompass smart TVs, refrigerators, and washing machines. There might also be a reassessment of income tax slabs to enhance disposable income, fostering increased spending and overall consumption.

Pallavi Singh Marwah, Sr. VP, SPPL says that she commends the anticipated increase in budget allocation for women, representing progress made over the past decade. The implementation of initiatives such as direct cash transfers and the potential introduction of skill development programs tailored for women are encouraging steps, showcasing a commitment to promoting economic empowerment and inclusivity. Marwah says that she eagerly anticipates the positive impact these measures could have on the lives of women nationwide, fostering personal growth and contributing to the overall economic landscape.

To address market declines and surging inflation, Marwah says that it is recommended that the government adopts growth-oriented measures to boost sales. Simplifying GST norms, investing in upskilling, and reforming tax slabs for consumers, along with maintaining the 15% corporate tax for new manufacturing units, would help invigorate the retail industry.

Allocation is expected to be constrained following the allocation of Rs 35,000 crore toward crucial capital investments prioritizing the facilitation of an energy transition. The focus is on initiatives aimed at achieving net-zero targets and enhancing energy security. Efforts are being taken to fulfill the commitment of tripling global renewable energy capacity by 2030. It is improbable that there will be revised targets for ethanol blending usage.

There could be slight adjustments in fund allocation, with the government maintaining its current procurement plans. The Defence Procurement Board has granted in-principle approval for the Indian Navy’s proposal regarding the second indigenous aircraft carrier. Additionally, the DAC may assess the Indian Air Force’s proposal for the procurement of an additional 97 Tejas Mark-1A aircraft, with an estimated cost of Rs 1.15 lakh crore.

As taxpayers and tax experts anticipate additional tax benefits under the Old Tax Regime in Budget 2024, there is also a call for enhancing the attractiveness of the New Tax Regime by introducing some tax deductions within this framework. According to Vivek Jalan, Partner at Tax Connect Advisory, there exists a noticeable distinction between taxpayers opting for the new scheme and those favoring the old scheme. The new scheme tends to be favored by those newly entering the tax net, whereas established taxpayers tend to opt for the old scheme. It is anticipated that the new scheme might be transformed into a ‘Hybrid’ system by incorporating certain graded deductions, aiming to make it more appealing to established taxpayers as well.

Stakeholders in the study abroad sector are anticipating positive measures from Finance Minister Nirmala Sitharaman in the upcoming interim Budget 2024–25, set to be presented in the Lok Sabha on February 1. Here are insights from key figures in the industry:

Expectations of foreign education sector from the FM in Budget 2024

BK Bajaj, CEO, Infomerics Ratings and Valuation says that the Budget for 2024, despite being labeled a ‘Vote on Account,’ has garnered significant expectations, fueled by India‘s emergence as a global growth driver and the widespread belief in the potential return to power for the current government. Even within the constraints of a Vote on Account, it is anticipated that the government will persist in prioritizing fiscal consolidation, easing business and taxation laws, and emphasizing sectors like infrastructure, MSMEs, and financial inclusion. There is also a possibility of an extended focus on the Production-Linked Incentive (PLI) scheme to invigorate the manufacturing sector, rural welfare with an emphasis on farmer income transfer, and initiatives for universal housing.

The expectation is for a clear indication that the ongoing reforms across various sectors are not only here to stay but will also gather momentum. However, while steering the trajectory of economic growth and structural transformation, there might be a heightened emphasis on addressing the needs of the people at the grassroots level.

Samir K Modi, Managing Director, Modi Enterprises, says that India‘s consumer industry stands at the cusp of a significant transformation, aiming to solidify its status as the world’s third-largest market by 2027. Proclaimed as one of the largest global retail markets, India is expected to reach a valuation of $1.41 trillion by 2026. According to a recent Deloitte report, the country is poised to witness a surge in e-commerce and retail activities, propelled by a projected increase to over 900 million internet users. Despite these optimistic projections, the past year has seen subdued consumer sentiment and spending due to high inflation.

Given this backdrop, the Union Budget for FY 24-25 should concentrate on stimulating demand and encouraging consumption. This can be achieved by offering benefits or concessions to the retail and FMCG sectors, ultimately rejuvenating overall consumer sentiment. A significant reform proposal includes permitting 100% Foreign Direct Investment (FDI) in multi-brand retail for goods manufactured in India. This strategic move could benefit both traditional and modern retailers, fostering growth and innovation across the sector.

Furthermore, substantial investments in the Open Network for Digital Commerce (ONDC) and digital infrastructure could be instrumental in accelerating the growth of e-commerce and the digital economy. These measures aim to establish a unified national policy for retail, creating a harmonious environment for traditional and modern retailers to operate seamlessly and drive greater growth in the industry.

Sumit Gupta, Founder Viral Pitch says that the influencer economy has transcended its initial status as a mere phrase within the community, evolving into a pivotal sector in the marketing landscape and an integral component of various brands’ digital expenditures. Recognizing the significance and impact of this industry, the government’s acknowledgment is a noteworthy stride. As we approach the upcoming Union Budget 2024, it becomes crucial to recognize the pivotal role of influencers in propelling digital growth, particularly in tier-II and tier-III markets. We anticipate potential relaxations for micro-influencers, paving the way for unprecedented growth in this industry. Additionally, the formulation of clear guidelines and regulations specific to influencer marketing practices could provide stability and foster a sense of professionalism within the industry. This, in turn, could signify a positive step towards establishing a collaborative and dynamic digital ecosystem.

Piyush Kulshreshtha, Founder & CEO, Khul Ke said that the government has made significant progress in nurturing startups and championing flagship programs like Atmanirbhar Bharat in recent years. As we stand at a crucial juncture, it is imperative for the government not only to formulate supportive policies but also to actively promote the adoption of innovations stemming from Startup India and Atmanirbhar Bharat. The endeavors of the Indian youth deserve acknowledgment, given their presentation of a myriad of technology solutions for the country. Our platform, revolving around social networking, encompasses various functionalities, from facilitating online meetings to enabling live podcast streaming and short video creation, illustrating the diverse opportunities arising from these initiatives. We strongly advocate for the allocation of an adoption budget for Indian Homegrown platforms dedicated to Atmanirbhar Bharat and Startup India initiatives in the upcoming interim budget across all three branches of the executive, legislature, and judiciary.