Union Budget 2024 Expectations Highlights: Union Finance Minister Nirmala Sitharaman is set to present the Budget for the financial year 2024-25 in the Lok Sabha on July 23. Income tax relief is one of the key aspects that most are looking forward to. Especially, given how ‘miffed’ the middle-class is, the popular assumption and expectation this Budget is that the Modi 3.0 Cabinet will use the Budget to woo back the support it lost during elections.
This apart demand for tax holidays and GST exemption by a host of industries also features prominently on the Budget wishlist.
There are also expectations that the Finance Minister will perhaps be generous in terms of allocation for welfare schemes and public capex given the windfall dividend payout by the RBI and the challenges of balancing coalition partners and their expectations.
All eyes are now on July 23 when Nirmala Sitharaman will table the Budget in the Parliament during the Monsoon Session that kickstarts on July 22. For live coverage and updates on all news related to the Budget, follow Financial Express Online.
With the Union Budget 2024 set to be presented next week, many taxpayers are eager to see if the standard deduction limit will be increased.
Currently, salaried individuals can claim a standard deduction without providing proof of actual expenses. Under Section 16(ia) of the Income Tax Act, 1961, those filing under the old tax regime can claim a standard deduction of Rs 50,000 against their salary. The Finance Act 2023 extended this benefit to salaried individuals opting for the concessional tax regime under Section 115BAC of the Income Tax Act.
The finance ministry has reportedly opposed a proposal for a capex-linked subsidy in the new electronics components manufacturing scheme, according to sources.
Officials believe there are risks in supporting proposals with upfront capital expenditure without specific targets. The main concerns are that beneficiaries might delay or not start production after claiming the subsidy, impacting the exchequer. Additionally, companies could inflate their capex requirements and project costs, making it challenging for the government to determine the accurate costs, sources said.
India stands at a critical point in its pursuit of sustainable development. The Union Budget 2024 presents a key opportunity to advance towards a greener future. For India to become a global leader in the green economy, the government must prioritise sustainable growth, energy security, and environmental stewardship in its financial planning.
As the Union Budget 2024 approaches next week, many taxpayers are eager to see if the standard deduction limit will be increased.
Salaried individuals are currently eligible for a standard deduction without needing to provide proof of actual expenses. Under Section 16(ia) of the Income Tax Act, 1961, those filing under the old tax regime can claim a standard deduction of Rs 50,000 against their salary. The Finance Act 2023 extended this benefit to salaried individuals opting for the concessional tax regime under Section 115BAC of the Income Tax Act.
The government is considering the introduction of an employment-linked incentive scheme (ELIS) in the Budget 2024-25 to promote job creation. Similar to the production-linked incentive (PLI) scheme, ELIS would target a few labor-intensive sectors, sources said.
The labor ministry reportedly recommended the scheme to the finance ministry earlier this month. Sources indicate that ELIS would apply to sectors such as toys, textiles and apparel, furniture, tourism, and logistics.
Government sources reported by Business Today TV indicate that the Centre may increase the budgetary allocation for the PM Kisan Samman Nidhi by 30%, raising it to approximately Rs 80,000 crore in the upcoming budget. The interim budget had previously set the allocation at Rs 60,000 crore, offering Rs 6,000 per farmer annually. Following demands from agricultural representatives during pre-budget consultations with Finance Minister Nirmala Sitharaman in late June, this amount could rise to Rs 8,000 per farmer.
In anticipation of the Union Budget, the Ministry of Skills Development and Entrepreneurship has proposed amendments to direct and indirect tax rules, as well as the Companies Act 2013. These changes aim to enhance the employable workforce and leverage the demographic dividend.
Specifically, the ministry advocates for including skilling programmes under Section 10 (23C) of the Income Tax Act. Currently, these programmes do not fall under the tax-exempt definition of education, unlike not-for-profit universities and educational institutions.
Ahead of the Budget presentation, the Ministry of Skills Development and Entrepreneurship has proposed amendments to direct and indirect tax rules, as well as the Companies Act 2013. The ministry advocates for including skilling programs under Section 10 (23C) of the Income Tax Act, aiming to expand the pool of skilled workers and leverage the demographic dividend.
With Finance Minister Nirmala Sitharaman set to present the Union Budget 2024 on July 23, Barclays economists anticipate a signal of policy continuity and fiscal consolidation, with a slight shift in spending. Shreya Sodhani, Regional Economist at Barclays, noted, “The government will likely focus on capex while using increased receipts to fund higher revenue spending, balancing economic and political needs.”
Key fiscal developments include higher-than-projected tax revenues in Q1, potentially leading to increased tax collection estimates, and a significant dividend of Rs 2.1 lakh crore announced by the RBI.
The Indian Space Association (ISpA), representing the nation’s private space enterprises, has proposed a set of recommendations for the Union Budget 2024-25. These suggestions are designed to bolster the financial and operational vitality of India’s growing space industry, emphasizing financial incentives and strategic government backing to accelerate its advancement.
During the Interim Budget 2024, plans were unveiled for the launch of Blue Economy 2.0, aimed at promoting climate-resilient activities and sustainable development in coastal areas. Additionally, India announced initiatives to solarise the rooftops of 10 million households and provide viability gap funding for harnessing offshore wind energy, starting with an initial capacity of one gigawatt to achieve net-zero carbon emissions.
As India boosts support for defence startups with initiatives like iDEX, the TDF, and simplified 'Make' guidelines, Finance Minister Nirmala Sitharaman's announcement of a new scheme for deep-tech defence technologies marks a key milestone.
Start-up-friendly measures in 2023-24 show the government's commitment to addressing challenges faced by these entities. Notably, contingency measures help startups recover from losses, easing financial burdens and allowing a focus on core strengths. More such provisions are needed in the upcoming budget.
The Covid-19 pandemic has significantly affected global economies, including defence budgets. Nations had to reallocate resources to address public health challenges and economic downturns, resulting in cuts and delays in defence projects.
Countries redirected funds initially set for defence to support healthcare systems, procure medical supplies, and aid economic relief. For example, the UK diverted part of its defence budget to the National Health Service (NHS) and other emergency services. In India, various sectors, including defence, saw budget cuts to fund pandemic relief efforts.
Finance Minister Nirmala Sitharaman, set to present the annual budget on July 23, may introduce tax incentives aimed at boosting exports of items like farm products, pharmaceuticals, and digital services, according to exporters. India's economy, which grew by 8.2% in fiscal 2024—marking the fastest growth rate among major economies—is projected to grow nearly 7% in fiscal 2025. The country has implemented several initiatives in the manufacturing sector, including offering production-linked incentives of 4%-6% to encourage exports of electronic goods, pharmaceuticals, and other products. Additionally, India is exploring new market opportunities in the Middle East and Africa.
India's goods and services exports likely increased by 5.4% year-on-year to $65.47 billion in June, driven by a surge in orders that could elevate total exports to $800 billion for the current fiscal year ending in March 2025, according to the trade secretary on Monday. Merchandise imports in Asia's third-largest economy rose by 5% to $56.18 billion in the same month, indicating a rise in domestic demand for industrial machinery and gold imports. Merchandise exports increased by 2.6% year-on-year to $35.2 billion in June.
"In the upcoming budget, we anticipate the government will continue its efforts to support the startup community with policies that enhance ease of doing business and introduce reforms beneficial to businesses. We urge the government to take vital steps in incentivizing and promoting innovation, recognizing that all innovation starts with some level of disruption. Although this may present challenges initially, it is crucial for driving significant future advancements. We hope the government will protect our right to innovate while strengthening the ecosystem with necessary regulations. Lastly, we look forward to a continued push towards promoting and enhancing India's digital infrastructure to expand financial inclusion and bridge the digital divide," Perfios CEO Goswami added.
"The government has made significant strides in uplifting the financial ecosystem in the country through various groundbreaking decisions. With impactful initiatives like Startup India and the Atal Innovation Mission, we have made considerable progress from where we once stood. The interim budget presented earlier this year included notable measures to support the startup ecosystem, such as the announcement of a substantial corpus of Rs 1 lakh crore, featuring 50-year interest-free loans for startups and MSMEs, providing long-term financing opportunities at low or no interest rates. Additionally, the extension of tax benefits for startups until March 31, 2025, further underscores the government's commitment to fostering entrepreneurial spirit," says Sabyasachi Goswami, CEO, Perfios.
During in-person consultations, over 120 participants from 10 stakeholder groups attended the meetings. These groups included experts and representatives from farmer associations and agricultural economists; trade unions; the education and health sectors; employment and skilling sectors; MSMEs; trade and services sectors; industry; economists; the financial sector and capital markets; as well as the infrastructure, energy, and urban sectors.
Tashwinder Singh, CEO & MD, Niyogin Fintech Limited, said, “We expect regulatory changes that simplify compliance, taxation policies that encourage entrepreneurship, and innovation incentives that drive R&D investments. Moreover, it would be great to see enhanced support for MSMEs, which are the backbone of our economy, along with policy ease for fintech startups that fuels their growth. Additionally, we hope that the government takes measures to support the lending industry through access to capital and affordable interest rates, enabling entrepreneurs to realize their vision. Furthermore, we look forward to relaxed norms for NBFCs, allowing them to contribute more substantially to the economy. Finally, we also look forward to significant investments in digital infrastructure development, enabling us to advance into a futuristic economy.”
“We expect the Union Budget in July to provide a combination of (1) higher capex targets, (2) higher allocation to the rural and agricultural sectors, and (3) further fiscal consolidation—without shifting away from the existing prudent fiscal policy framework. In our view, (1) the RBI’s higher-than-budgeted surplus transfer (additional 0.4% of GDP) for FY2025, and (2) strong tax collections in 2MFY25 will allow the government to provide adequate support for capex and incremental support to consumption,” stated a report by Kotak Institutional Equities.
There are a number of aspects impacting M&A activities that merit due consideration in this Budget. Currently, the NCLT approval process for mergers and demergers under company law is time consuming. Vaibhav Gupta, Partner, Dhruva Advisors, said, “The Government should consider making the approval process simpler and align it with global practices. At least in internal group restructuring matters, the approval process can be simplified. Similarly, the Government should consider introducing provisions for tax neutral re-organisation of LLPs along the same lines as for amalgamation or demerger of companies. In addition, provisions for permitting merger of an LLP with a company should also be introduced in the corporate laws to facilitate ease of doing business and encourage businesses being conducted through LLPs.”
He further added, “The Budget should address the tax neutrality of share swaps, ensuring that such transactions do not attract immediate tax liabilities and tax is deferred till the point of sale. This would facilitate smoother M&A deals and encourage the use of equity as a currency for acquisitions.” He also said that the government should also work on uncertainties regarding the tax implications when foreign companies merge or restructure. Further, he added, this is required to bring the resident shareholders at par with non-resident shareholders who are not taxed when a foreign company merges into an Indian company or at the time of merger of Indian companies. Lastly, on GIFT City, Vaibhav Gupta said, “As the GIFT City evolves into a globally recognized international financial centre, measures should be announced to facilitate a more open, transparent and vibrant capital flow framework in the GIFT City.”
Sandeep Katiyar, Co-Founder and CFO, Finhaat, said, “We are expecting indirect tax rationalisation on affordable health policies. Currently, there is 18% GST applicable on all health policies; we are expecting lower GST rates for affordable health insurance plans in the view of the GoI initiative looking to universalise health insurance.” He further added that the government needs to bring an amendment in Insurance Act 1938 for allowing entry of more regulated entities like Standalone Micro-insurance Co or Managing General Agent (MGA), as “allowing this will support increase in the spread and insurance penetration”.
Gautam Bali, Founder and Managing Director, Vestige Marketing Pvt Ltd, said, “The direct-selling industry in India holds immense potential for nurturing entrepreneurship and driving economic advancement. We look forward to regulatory frameworks and policies that can strengthen ethical business practices and create more opportunities for rural India.”
The government, he added, should introduce a social security scheme for gig workers, acknowledging their valuable contributions to the economy. “The Government of India should highlight the potential of the direct-selling industry as a significant source of self-employment and encourage companies to offer quality products at fair prices in the interest of consumers. With strategic support and impactful measures, we are confident that the direct-selling industry can become a key player in the global market,” he added.
The ministry of skills development and entrepreneurship has proposed amendments in direct and indirect tax rules and Companies Act 2013. As we approach the Budget presentation date, the ministry called for inclusion of skilling programmes in the Section 10 (23C) of the Income Tax Act. The demand is in view to creating a larger pool of employable workforce while also harnessing the demographic dividend.
Krishna Prasad Chigurupati, Chairman and Managing Director, Granules India Limited, said, “India's pharmaceutical industry, recognized as the 'pharmacy of the world', is on the verge of a major transformation. Indigenous manufacturers are evolving with superior, cost-effective products. As a fast-growing sector, it is poised to become a global leader.”
To achieve this goal, he added, the Indian government needs to take bold strides, including creating innovation zones with benefits and infrastructural support, and encouraging collaboration between public and private entities. “The pharmaceutical industry needs more investment, and the government must incentivize and fund cutting-edge drug research and development. Streamlining regulations to speed up approvals for new treatments and investing in educating a workforce skilled in pharmaceutical innovation are crucial. Simultaneously, authorities need to weed out players that don’t conform to high-quality drug standards accepted globally, to become more credible and contribute to export earnings. These efforts will usher in a new era of Indian pharmaceutical leadership, characterized by path-breaking outcomes. The industry can then be part of India’s ambitious Viksit Bharat journey,” he said.
At first glance, the Union government's expenditure on healthcare might seem to be increasing. However, from 2018-19 to 2023-24, it has consistently decreased both as a share of the Budget and as a percentage of GDP. In reality, since 2019-20, healthcare spending has barely kept up with inflation.
Sandeep Agrawal, Director and Co-Founder of Teamlease Regtech, said, “We can expect announcements that enhance EoDB and consolidate the tax system while ensuring stability. I also hope there will be some progress towards the Direct Tax Code. The implementation of GST has reformed the indirect taxation system, and we can expect the Direct Tax Code to lower the tax burden and simplify the tax structure similarly.”
He further said that the government can enhance the limits for each slab in the new tax regime in the upcoming Budget to reduce tax liabilities for the middle class. “Increasing the rebate limit in the 2024 Budget will be a logical choice in getting taxpayers to switch to the new regime. These changes enhance disposable income and significantly boost their spending power,” he added.
According to government sources reported by Business Today TV, the Centre may boost the budgetary allocation for the PM Kisan Samman Nidhi by 30 per cent, bringing it to approximately Rs 80,000 crore in the upcoming budget. Previously, the government had set the PM Kisan Samman Nidhi allocation at Rs 60,000 crore in the interim budget, providing an allowance of Rs 6,000 per farmer per year. Due to demands from agricultural representatives during pre-budget consultations with Finance Minister Nirmala Sitharaman in late June, this amount could rise to Rs 8,000 per farmer.
As India is aiming to achieve Net Zero emissions by 2070, there must be an acceleration of efforts towards this direction. Varun Puri, Managing Director, Green Power International, said, “The government has made significant strides in this direction, demonstrating its commitment to sustainable growth. From increasing budget allocations to supporting emerging technologies such as green hydrogen, each step drives us closer to our visionary goals. Investments are necessary to fund R&D to produce hydrogen with relatively coarse water quality, ideally close to seawater. This would allow the most efficient use of one of the most abundant natural resources i.e., water.”
He further added that in order to address carbon emissions, he added that the companies need to concentrate on other sectors that significantly contribute to emissions and promote sustainable development. “Incentivising carbon capture and utilisation is one viable approach, as carbon capture presents a powerful solution until hydrogen costs decrease with scaling. In this Union Budget, we anticipate a strong policy framework to facilitate efficient growth and subsidies to encourage businesses to adopt emerging eco-friendly practices,” he said.
Following the Interim Budget earlier this year and the challenges of the economy in the recent past, Gaurav Jalan, Founder & CEO, mPokket, said that the upcoming full Budget is expected to focus on employment, infrastructure and innovation. “We expect the government to double down on initiatives relating to upskilling of youth to improve employability. Alongside this, increasing jobs is expected to be the core government agenda,” he said.
Gaurav Jalan further added, “We expect this to be through a dual approach of easing credit access to small and medium businesses to catalyse their growth and through incentives on research and investments from the private sector. We expect the government to also focus on the disposable income of the middle class by revisiting direct taxation rates. This shall drive a sustained domestic consumption-led growth for the economy. Additionally, we believe the government shall continue to view positively the contribution of fintechs as a key driver of easy access to credit and their potential to create employment.”