India Budget 23rd July 2024 Demystified

Easy to read and easy to understand what's in it for you

QUOTE: The budget is not just a collection of numbers, but an expression of our values and aspirations.

INTRODUCTION

Budget 2024 Key Highlights : Finance Minister Nirmala Sitharaman presented the Union Budget 2024-25 in the parliament today. This was the first budget of Prime Minister Narendra Modi’s third term in the government. The budget 2024 envisaged sustained efforts on 9 priorities for generating ample opportunities for all.

MACRO FRONT

FY25 fiscal deficit target to 4.5%,

Revised income tax structure in the new regime while hiking the long-term capital gains tax.

?CUSTOM DUTY HIKES

Hikes in custom duties for certain products. These things are likely to get costlier after Budget 2024:

Ammonium Nitrate

PVC Flex Films/Flex Banners

Laboratory Chemicals

Solar Glass for manufacture of solar cells or modules

Non-Biodegradable Plastic

CUSTOM DUTY CUTS

Budget 2024 Key Highlights Live: What gets cheaper after Budget 2024

Mobile phones and chargers

Printed Circuit Board Assembly (PCBA) and Oxygen Free Copper for use in manufacture of Resistors

Precious metals like Gold, Silver and Platinum

Blister Copper and Ferro-Nickel

Cancer drugs - Trastuzumab Deruxtecan, Osimertinib and Durvalumab

Components for manufacture of vessels

Solar energy parts

Certain brood stock, shrimp and fish feed

Medical products like orthopedic implants, artificial parts of the body

TAX ON REAL ESTATE

Budget 2024 announced removal of indexation benefit on sale of property along with lowering on of long term capital gains tax to 12.5%.

LTCG arising from sale of property was earlier taxed at 20% with indexation benefit. Now, sale of property will attract a new LTCG tax rate of 12.5% without indexation benefit.

SECTOR WISE EXPENDITURE

Budget 2024 Key Highlights Live: Budget expenditure on major sectors

Defence - ?4,54,773 crore

Rural Development - ?2,65,808 crore

Agriculture and Allied Activities - ?1,51,851 crore

Home Affairs - ?1,50,983 crore

Education - 1,25,638 crore

IT and Telecom - ?1,16,342 crore

Health - ?89,287 crore

Energy - ?68,769 crore

Social Welfare - ?56,501 crore

Commerce & Industry - ?47,559 crore

?OTHER TAX PROPOSALS

Budget 2024 Key Highlights Live: Other key proposals on taxes

Abolish Angel tax for all classes of investors

Simpler tax regime to operate domestic cruise

Provide for safe harbour rates for foreign mining companies (Selling raw diamonds)

Corporate tax rate on foreign companies reduced from 40% to 35%

?BUDGET ESTIMATES

Budget 2024 Key Highlights Live: Budget Estimates 2024-25

FY25 Total Receipts estimated at ?32.07 lakh crore

FY25 Total Expenditure estimated at ?48.21 lakh crore

Net tax receipts estimated at ?25.83 lakh crore

Gross market borrowings estimated at ?14.01 lakh crore

Net market borrowings estimated at ?11.63 lakh crore

FY25 Fiscal deficit estimated at 4.9% of GDP

The fiscal consolidation path announced by me in 2021 has served our economy very well, and we aim to reach a deficit below 4.5% next year. The Government is committed to staying the course. From 2026-27 onwards, our endeavor will be to keep the fiscal deficit each year such that the Central Government debt will be on a declining path as percentage of GDP, Finance Minister Nirmala Sitharaman said.

CHANGES IN SECTOR SPECIFIC CUSTOMS DUTY

?Changes in sector specific customs duty

Basic Custom Duty (BCD) on mobile phone, mobile PCBA and mobile charger cut to 15%.

Customs duties on 25 critical minerals for sectors like nuclear energy, renewable energy, space, defence, telecommunications, and high-tech electronics are made fully exempt and reduce BCD on two of them.?

BCD on certain broodstock, polychaete worms, shrimp and fish feed reduced to 5 %.

Customs duty on various inputs for manufacture of shrimp and fish feed has been exempted.

BCD on real down filling material from duck or goose reduced

Customs duties on gold and silver reduced to 6% and that on platinum to 6.4%.

BCD on ferro nickel and blister copper removed

BCD on oxygen free copper for manufacture of resistors removed

BCD on ammonium nitrate reduced from 7.5% to 10%

To promote domestic aviation and boat & ship MRO, the period for export of goods imported for repairs has been extended from 6 months to 1 year.

CHANGES IN CAPITAL MARKETS

Budget 2024 Key Highlights Live: Tax on share buyback, STT on F&O

Budget 2024 Key Highlights Live: Taxes announced on Buy-back of shares and Securities transaction tax (STT) rates on F&O transactions

Buy-back of shares-Budget 2024 proposed that the income from buy-back of shares by companies be chargeable in the hands of the recipient investor as dividend, instead of the current regime of additional income-tax in the hands of the company. Further, the cost of such shares shall be treated as a capital loss to the investor.

It is proposed to increase the rates of STT on sale of an option in securities from 0.0625% to 0.1% of the option premium, and on sale of a futures in securities from 0.0125% to 0.02% of the price at which such futures are traded.

FOREIGN COMPANIES

Budget 2024 Key Highlights Live: Cut in income tax for foreign companies

The Budget 2024 proposed to reduce the rate of income-tax chargeable on income of foreign company (other than that chargeable at special rates) from 40% to 35%.

INCENTIVES TO IFSC

Budget 2024 Key Highlights Live: FM Sitharaman announced certain incentives to IFSC. Here are those:

Retail schemes and Exchange Traded Funds in IFSC, shall enjoy tax exemptions along similar lines as available to specified funds.

Exemption of certain income of Core Settlement Guarantee Fund set up in IFSC.

Exclusion of the applicability of section 94B to certain finance companies located in IFSC.

Where a venture capital fund (VCF) located in IFSC extends a loan / other amount to an assessee, it shall no longer be called upon to explain the source of funds.

Surcharge shall not apply on income-tax payable on income from securities by specified funds.

CHANGES IN CAPITAL GAINS TAXES

Budget 2024 Key Highlights Live: Changes in Capital Gains Taxes

The taxation of capital gains is proposed to be rationalized and simplified,

Short term gains tax on specified financial assets raised to 20% from 15%, while that on all other financial assets and non-financial assets shall continue to attract the applicable tax rate.

Long term gains tax on all financial and non-financial assets raised to 12.5%. It is proposed to increase the limit of exemption of capital gains on certain listed financial assets from ?1 lakh to ?1.25 lakh per year.

Listed financial assets held for more than a year will be classified as long term, while unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term.

Unlisted bonds and debentures, debt mutual funds and market linked debentures, irrespective of holding period, will attract tax on capital gains at applicable rates.

CHANGES IN TDS AND TCS

Budget 2024 Key Highlights Live: Announcements on TDS and TCS

Payments made by a firm to its partner shall be subject to TDS at 10% for aggregate amounts more than ?20,000 in a financial year.

TCS on notified luxury goods

Levy TCS of 1% on notified goods of value exceeding 10 lakh rupees.

TDS on Floating Rate Savings (Taxable) Bonds (FRSB) 2020

TDS is proposed on interest exceeding ?10,000 on Floating Rate Savings (Taxable) Bonds (FRSB) 2020 or any other notified security of the Central or State Governments

?TAX RATE REVISIONS IN NEW REGIME

Budget 2024 Key Highlights Live: Tax rate structure revised in new regime

Budget 2024 Key Highlights Live: FM Sitharaman revises tax rate structure in the new income Tax regime. The revised tax slabs will result in ?17,500 saving in income tax, Sitharaman said. Here’s the revised tax structure:

?0-3 lakh - Nil

?3-7 lakh - 5%

?7-10 lakh - 10%

?10-12 lakh - 15%

?15 lakh and above - 30%

CAPITAL GAINS TAX

Budget 2024 Key Highlights Live: Announcements on Capital gain taxes

Budget 2024 Key Highlights Live: Here are the announcements on Capital gain taxes

Short term capital gain tax on certain financial assets revised to 20%

Long term capital gain tax revised to 12.5% on Financial assets

TDS rate on e-commerce operators to be cut to 0.1% from 1%

?CUTS IN CUSTOM DUTIES

Budget 2024 Key Highlights cut in Custom Duties:

Customs duties on gold, silver cut to 6%, platinum to 6.4%

Lithium, Copper, Cobalt exempted from Custom Duty

Expand the list of exempted capital goods used in manufacturing of solar cells, panels

Reduce BCD subject to conditions on MDI for manufacturing of spandex yarn from 7.5% to 5%

Exempt customs duty on manufacturing of connectors

Exempt customs duty on Oxygen-fused copper

MACRO INDICATORS

FY25 Fiscal Deficit projected at 4.9% of GDP

FY25 fiscal deficit at 4.9% of GDP as against 5.1% in Interim Budget.

Expenditure for FY25 seen at 48.21 lakh crore

Receipts for FY25 32.07 lakh crore

FY25 Capex at ?11.11 lakh crore

OTHER INITIATIVES

Live: Industrial parks to be developed in or near 100 cities

Investment-ready “plug and play" industrial parks to be developed in or near 100 cities

12 industrial parks sanctioned under National Industrial Corridor Development Programme

Critical Mineral Mission to be set up for domestic production, recycling of critical minerals, & overseas acquisition of critical mineral assets

?Package in a boost to skilling

Skilling Programme and Upgradation of Industrial Training Institutes

1,000 ITIs to be upgraded in hub & spoke arrangements in 5 years

Focus on outcome and quality in collaboration with states and industry

Internship in Top Companies

1 crore youth to be skilled by India's top companies in five years

12-month Prime Minister's Internship with monthly allowance of ?5,000

INCENTIVES FOR MSMES

Budget 2024 Key Highlights Live: Announcements for MSMEs

New mechanism for facilitating continuation of bank credit to MSMEs during their stress period

Limit of Mudra loans increased from ?10 lakh to ?20 lakh

Turnover threshold of buyers for mandatory onboarding on TReDS platform to be reduced from ?500 crore to ?250 crore

Financial support for 50 multi-product food irradiation units in MSME sector

E-Commerce Export Hubs to be set up in PPP mode to enable MSMEs and traditional artisans to sell their products in international markets

Revision of Model Skill Loan Scheme

Model Skill Loan Scheme to help 25,000 students every year.

Setting up of working women's hostels and creches in collaboration with industry

Model Skill Loan Scheme to be revised to facilitate loons up to & ?7.5 lakh with a guarantee from a government-promoted fund: expected to help 25,000 students every year

E-vouchers for loans upto ?10 lakh for higher education in domestic institutions to be given directly to 1 lakh students every year for annual interest subvention of 3% of loan amount

EMPLOYMENT LINKED SCHEME

Budget 2024 Key Highlights Live: 3 schemes announced for ‘Employment Linked Incentive’

Budget 2024 Key Highlights Live: FM Sitharaman announces three schemes for employment-linked incentives. These schemes will be based on enrolment in the EPFO and focus on recognizing first-time employees.

Scheme A: First timers

First-timers to receive one month's wage upon entering the workforce in all formal sectors. A direct benefit transfer (DBT) of one month's salary, up to ?15,000, to be provided in three instalments.

Scheme B: Job creation in manufacturing

Job creation in manufacturing sector to be incentivized through a scheme linked to the employment of first-time employees. Incentives to be provided to both employees and employers as per their EPFO contributions for the first 4 years of employment.

Scheme C: Support to employers

Reimbursement to employers up to ?3,000 per month for 2 years towards their EPFO contribution for each additional employee. The eligibility limit for this will be a salary of ?1 lakh per month, and it is expected to benefit 2.1 lakh youths

AGRICULTURE

Budget 2024 Key Highlights Live: Announcements for Agriculture sector

Provision of ?1.52 lakh crore for the agriculture and allied sectors

10,000 bio research centres will be established

Next two years, 1 crore farmers will be initiated into natural farming supported by branding and certification

Vegetable production and supply chain, large clusters to be developed closer to consumption centres

Financial support for shrimp breeding centres to be provided, export to be facilitated through NABARD

Kisan Credit Cards to be launched in 5 states

To release 109 varieties of 32 crops

Will help Natural Farmers with verification and branding

To ensure self-sufficiency in pulses and oil seeds6 crore farmers and their land will be brought into the farmer and land registry,

BUDGET PRIORITIES

Productivity in Agri sector

Employment and Skill Development

Inclusive priority and Social Justice

Manufacturing and Services

Urban Development

Energy Security

Infrastructure

Innovation and Research

Next Generation Reforms

KEY TAKEAWAYS

??2 lakh crore for 5 new schemes

?2 lakh crore for 5 new schemes. The focus will be on jobs and skilling of 4.1 crore youth.

India’s economy continues to shine in uncertain global economy,

Global economy is still in the grip of uncertainty

People have reposed faith and elected NDA government for the third time

India’s inflation continues to be low, stable

Poor, woman, youth and farmer are focus areas of this government

Increase in retail investors in stock market calls for careful consideration: Economic Survey 2024

Indian economy is on a strong wicket and stable footing, demonstrating resilience in the face of geopolitical challenges.

India’s sustained post-Covid recovery, stable inflation, and a positive investment climate driven by both the public and private sectors.?

India’s real GDP in FY24 was 20% higher than the pre-Covid (FY20) levels, implying a 4.6% CAGR from FY20, despite a 5.8% decline in FY21.

Real GDP growth for FY25 projected at 6.5% - 7.0% for FY25.

Public investment has sustained capital formation in the last several years even as the private sector shed its balance sheet blues and began investing in FY22.

Headline inflation rate is under control, supported by the Central Government’s timely policy interventions and the RBI’s price stability measures. However, elevated food inflation is worrisome.

India’s inflation targeting framework should consider targeting inflation, excluding food. Higher food prices are, more often, not demand-induced but supply-induced.

India would require significant job creation until 2036 (at an average of 8 million non-farm jobs per annum) to accommodate its growing workforce, emphasizing the need for strategic planning in employment generation.

The fiscal balances of the central and state governments taken together have improved progressively despite expansionary public investments.

Current Account Deficit stood at 0.7% of GDP in FY24, an improvement from the deficit of 2% of GDP in FY23.