 "Union Finance Minister Nirmala Sitharaman arrives at the Finance Ministry, North Block, who is set to table the Union Budget 2024-25, in New Delhi, on 23 July. PTI")
Finance Minister Nirmala Sitharaman is set to present the full Union Budget shortly. This comes months after Sitharaman presented the interim budget on 1 February to a joint sitting of Parliament.
The full budget comes on the heels of the Lok Sabha polls. This is the first of the third National Democratic Alliance government under the leadership of Prime Minister Narendra Modi
But what are the expectations from Union Budget 2024?
Let’s take a closer look:
Revising tax slabs
As per Financial Express, taxpayers are looking for relief from Sitharaman.
The main demand from the salaried class is to revise the income tax slabs.
Sitharaman, in February, left the income tax slabs unchanged.
Under the new regime, the income tax slabs currently are
O to Rs 3 lakh – Nil
Rs 3 lakh to 6 lakh – 5 per cent
Rs 6 lakh to 9 lakh – 10 per cent
Rs 9 lakh to 12 lakh – 15 per cent
Rs 12 lakh to 15 lakh – 20 per cent
Above Rs 15 lakh – 30 per cent
Under the old regime, the income tax slabs currently are
O to Rs 2.5 lakh – Nil
Rs 2.5 to Rs 5 lakh – 5 per cent
Rs 5 lakh to Rs 10 lakh – 20 per cent
Above Rs 10 lakh – 30 per cent.
As per India Today, the exemption limit under the new regime may be raised from Rs 3 lakh to Rs 5 lakh.
This increase could help put more money in the hands of taxpayers – which could give increase consumption and thus keep India’s growth story on track.
Adhil Shetty, CEO of Bankbazaar.com, told Financial Express, “Taxpayers eagerly await budget announcements that will increase their disposable income. This year is no different; taxpayers expect higher deductions under the old regime and hope the new regime will allow more people to retain a greater portion of their income after taxes.”
Shetty added, “Given that most taxpayers favour the old regime despite the absence of inflation adjustment, the new tax regime will need to offer higher tax exemptions. This will enhance the appeal of the new regime.”
Impact Shorts
More ShortsIncreasing 80C
According to Financial Express, taxpayers have a slew of other demands including in increasing the Section 80C deduction limit and the standard deduction limit, giving homebuyers and investors more relief and making the new tax regime more attractive.
According to the newspaper, Section 80C has not been revisited since 2014 when the limit was increased to 1.5 lakh.
Investments in provident funds such as EPF, PPF, life insurance, home loans, Equity Linked Saving Schemes fall under this category.
The newspaper said it makes sense to reorganise Section 80C to ‘maximise benefits’ for taxpayers.
It added that separating loan repayments and insurance premiums can help government offer better efficient tax incentives.
Increasing the deduction limit is another long-pending demand.
The newspaper quoted Sanjiv Malhotra, senior advisor, Shardul Amarchand Mangaldas & Co, as saying, “Despite the consistent demand for a decrease in personal income tax prior to each budget, I am of the opinion that the current moment is suitable to implement this change. The middle class has been significantly impacted by years of inflation, making it reasonable for them to anticipate some form of relief. The Indian economy appears to be stable, with a GDP growth rate of 7 to 8 per cent. To further stimulate growth, it is essential to shift towards a consumption-driven strategy. This shift would involve restructuring tax brackets to provide individuals with greater disposable income.”
Real estate
According to Business Today, Sitharaman will likely offer incentives to real estate investment trusts (REITs) as well as building data centres.
Ramesh Nair, CEO, Mindspace Business Parks REIT, told Hindustan Times, “Maintaining investor confidence in REITs with a stable tax framework is crucial as REITs play a pivotal role in boosting real estate, stimulating economic growth, and creating jobs.”
Nair said the government needs to introduce reforms such as bringing down the holding period for units from 36 to 12 months, categorising REITs as equity instruments to increase liquidity, and allowing Input Tax Credit under the GST Act for construction procurements to lower costs.
“These reforms are essential as India strives for accelerated urbanisation to support sustainable growth, faster industrialisation to drive economic development and better infrastructure to facilitate smoother urban expansion. The Indian REITs Association has formally proposed these measures to the Ministry of Finance to ensure stability, foster growth, and amplify the appeal of REIT investments,” Nair told the newspaper.
Tech
Business Today quoted Mehta Equities as saying that the Electric Vehicle industry has ‘high expectations’ from the Budget.
“Automotive Component Manufacturers Association (ACMA) is seeking relaxations, including a uniform GST of 18 per cent on all auto parts, from the government in the upcoming Union Budget as this help remove an inverted duty structure that restricts working capital,” the firm wrote.
“The industry expectation is that the government introduces more multiple initiatives like scrappage policy, performance-linked incentive (PLI) scheme for EVs and advanced technology components, expanding the Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India (FAME) II and PLI schemes and increasing the scope for start-ups and MSME, the vehicle scrappage policy, and more on the recent announcement of the PLI scheme for semi-conductors which are likely to be a big step in the right direction,” it further stated.
Pharma
As per Business Today, the Budget could see more resources being put behind the Promotion of Research & Innovation Programme (PRIP) scheme.
Hindustan Times quoted Ajay Kakar, CEO of Salve Pharmaceuticals as saying, “We need to invest more in R&D to encourage businesses to adopt new technologies and develop innovative products. Policies in the pharmaceutical industry that speed up the approval processes while also providing financial incentives for drug development are significant.”
Defence and infrastructure
As per Business Today, the Centre is likely to increase its spending on defence and infrastructure.
According to India Today, infrastructure has long been a priority for the Centre.
“Investments in infrastructure not only stimulate economic activity but also create jobs and improve the quality of life for citizens. The government has been focusing on building roads, railways, airports, and other critical infrastructure to support long-term economic growth,” the piece noted.
Business
The creation of a new category of Non-Banking Financial Companies (NBFCs) dedicated to priority sector lending (PSL) to support the growth of MSMEs features among the key demands by business leaders in the forthcoming Union Budget.
Shachindra Nath, Founder & MD of UGRO Capital Ltd, urged the government to address specific challenges faced by NBFCs that cater to the Micro, Small, and Medium Enterprises (MSMEs).
He called for the establishment of NBFC-PSL, which would focus at least 85 per cent of their assets under management (AUM) on the priority sector.
“Creating an NBFC-PSL category will foster a more inclusive and resilient financial ecosystem for MSMEs,” Nath told PTI.
He said loans from banks to NBFCs for onward lending to MSMEs should be classified as ‘PSL loans’, with current caps removed.
Nath also proposed reintroducing the Partial Credit Guarantee Scheme and expanding it to include term loans.
This would provide a portfolio guarantee for the purchase of bonds or commercial papers with a rating of ‘AA’ or below issued by NBFCs-MSMEs by public sector banks, facilitating greater funding for small and medium NBFCs.
He called for harmonising of the SARFAESI Act limit to enhance recovery processes for smaller loan defaults by reducing the cap for credit eligible under this act from Rs 20 lakh to Rs 1 lakh for NBFCs, similar to banks.
“This will also improve financial health and boost confidence among lenders and investors,” Nath said.
Umesh Revankar, Executive Vice Chairman at Shriram Finance Ltd, stated that the Union government is expected to maintain its focus on infrastructure development and the MSME sector in the upcoming budget.
He said continued emphasis on infrastructure development, particularly logistics, will play a crucial role in making manufacturing in India more affordable and globally competitive.
“Improvements in logistics are likely to provide India with a significant advantage on the international stage,” said Revankar.
The Engineering Export Promotion Council (EEPC India) has also urged the government to revive the interest subvention scheme for exporters in its pre-budget recommendation.
EEPC India Chairman Arun Kumar Garodia has emphasised on the scheme’s importance, especially with rising interest rates.
He called for restoring the 3 per cent subvention rate for specific tariff lines and a 5 per cent rate for MSME exporters across all product categories.
The council represents nearly 9,500 member companies (over 60 per cent MSMEs), contributing 25 per cent of total exports.
With inputs from agencies