Key Take Aways for Corporates, MSME and Startups from Indian Union Budget July 2024

The Indian Union Budget of July 2024, presented by Finance Minister Nirmala Sitharaman, includes several initiatives aimed at benefiting corporates, startups, and MSMEs. Here’s how these sectors can leverage the announcements:

Corporates

1. Reduced Corporate Tax Rates: The budget proposes a reduction in corporate tax rates, making it more attractive for both domestic and international companies to invest in India. This reduction can lead to higher profitability and encourage reinvestment into business operations and expansions. Corporates can utilize the savings from reduced taxes to invest in new technologies, R&D, and workforce development.
2. Incentives for Green Energy: Companies investing in renewable energy and green technologies will benefit from tax breaks and subsidies. This can reduce operational costs and enhance sustainability credentials. Corporates can pivot towards greener practices and capitalize on the government’s push for renewable energy, potentially opening up new revenue streams in the green energy sector.

Startups

1. Skill Development Initiatives: The expansion of the Skill India initiative with a focus on emerging technologies like AI, robotics, and blockchain will ensure a steady supply of skilled talent. Startups can benefit from a workforce adept in cutting-edge technologies without incurring high training costs. Startups can collaborate with training programs to shape curricula that meet industry needs, ensuring that new hires are job-ready.
2. Financial Support and Credit Schemes: New credit guarantee schemes are aimed at providing easier access to credit for startups. This can help in securing necessary funding for scaling operations without the stringent collateral requirements typically associated with traditional loans. Startups can leverage these schemes to manage cash flow more effectively, invest in growth opportunities, and mitigate financial risks.

MSMEs

1. Simplified Tax Compliance and Reduced Rates: MSMEs with annual turnovers below a specified threshold will benefit from simplified tax compliance and reduced tax rates. This can significantly lower administrative burdens and operational costs. MSMEs can use the savings from reduced taxes to reinvest in business development, technology upgrades, and workforce expansion.
2. Increased Subsidies and Support: The budget introduces increased subsidies for sectors like agriculture and rural development, which many MSMEs are a part of. These subsidies can reduce input costs and improve profit margins. MSMEs can take advantage of these subsidies to enhance productivity, improve product quality, and expand their market reach.

Cross-Sector Benefits

1. Infrastructure Development: With a substantial allocation for infrastructure development, businesses across sectors will benefit from improved logistics, reduced transportation costs, and enhanced market connectivity. This can lead to faster and more efficient supply chains. Companies can plan for expansion into new regions and tap into emerging markets facilitated by better infrastructure.
2. Employment Generation Programs: The government’s focus on job creation through infrastructure projects and the digital sector will increase the overall employment rate. A more employed population means increased consumer spending, benefiting businesses through higher demand for products and services. Companies can also benefit from various government incentives for creating new job opportunities, thus expanding their workforce at a lower cost.

Agriculture

1. Agri-Tech and Innovation: The budget emphasizes the use of technology in agriculture, proposing significant investments in digital infrastructure to support agri-tech startups and innovations. This includes satellite-based remote sensing and the use of drones for precision farming.
2. Subsidies and Support: Increased subsidies for fertilizers and seeds aim to reduce the cost burden on farmers. There is also a proposal to establish more Farmer Producer Organizations (FPOs) to enhance farmers' income through better market access and collective bargaining.

Job Opportunities for Youth

1. Skill Development: The government plans to expand the Skill India initiative with a focus on emerging technologies like AI, robotics, and blockchain. Special training programs will be introduced to equip youth with skills in these high-demand areas.
2. Employment Generation: A significant budget allocation is directed towards creating new job opportunities in infrastructure projects, manufacturing, and digital sectors. This includes incentives for startups and MSMEs to hire more young professionals.

Capital Expenditure

The government has allocated ?11.11 lakh crore for capital expenditure, accounting for 3.4% of India’s GDP. This substantial investment is aimed at accelerating infrastructure development and stimulating economic growth. This figure is consistent with previous estimates and marks a significant increase from last year's revised estimate of ?9.5 lakh crore (PINKVILLA) (mint).

Income Tax Reforms

The budget introduces significant changes in the new tax regime:

• Standard Deduction: Increased to ?75,000 from ?50,000.
• Tax Slabs:?0-3 lakh: 0%?3-7 lakh: 5%?7-10 lakh: 10%?10-12 lakh: 15%?12-15 lakh: 20%Above ?15 lakh: 30%

These changes aim to provide tax relief to salaried employees, allowing them to save up to ?17,500 in income tax under the new regime (PINKVILLA).

Capital Gains Tax

The long-term capital gains tax rate on all assets has been increased from 10% to 12.5%, and the short-term capital gains tax rate has been raised from 15% to 20%. Additionally, an exemption limit for capital gains has been set at ?1.25 lakh annually (PINKVILLA).

Securities Transaction Tax (STT)

For Futures and Options (F&O) traders, the STT rate has doubled from 0.01% to 0.02%. This measure aims to increase tax revenue from the financial markets (PINKVILLA).

Infrastructure and Railways

A notable highlight is the continued focus on infrastructure, with key projects including the conversion of 40,000 normal rail bogies to Vande Bharat coaches to enhance passenger safety, convenience, and comfort. The budget also announced three major railway corridors: the port connectivity corridor, the energy, mineral, and cement corridor, and the high traffic density corridor, which are expected to decongest existing lines and improve logistics efficiency (mint).

Fiscal Responsibility

The budget maintains a strong commitment to fiscal prudence, with a targeted fiscal deficit of 4.5% of GDP by FY26. This approach is designed to appeal to foreign investors and potentially lead to a ratings upgrade (mint).

Sources:

1. Livemint - Key Highlights of Budget 2024
2. Economic Times - Union Budget 2024

Conclusion

The Union Budget 2024 provides a strategic framework for corporates, startups, and MSMEs to grow and thrive. By leveraging tax incentives, financial support, skill development initiatives, and infrastructure investments, businesses can not only enhance their operational efficiency and profitability but also contribute to India's broader economic development. It’s an opportune time for these sectors to align their strategies with government policies to maximize the benefits from the budget announcements.