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Union Budget 2024 : Date, time, and expectations

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On June 9, 2024 after the oath taking ceremony concluded and NDA formed the government, Modi 3.0 governments’ Finance minister Nirmala Sitharaman is expected to present the Union Budget for fiscal year 2024-25 in the latter half of July. With this, she will become the first finance minister to present seven consecutive Union Budgets, surpassing Morarji Desai who presented six Budgets in a row.

The Union Budget has been presented on February 1 in years before. As this was an election year, the finance minster presented Interim Budget to keep the government running

Differences between Interim Budget and Full Union Budget

Interim Budget Union Budget
Presented by the outgoing government or there is a transition in power. Presented by newly elected government or usually at the beginning of the financial year.
This is meant for the smooth functioning of the government until a new government presents a full budget. A comprehensive budget outlining the reigning government's financial plans for the entire fiscal year.
Primarily focused on maintaining the continuity of government operations. Focuses on setting the financial priorities and goals for the entire fiscal year.
Generally limited to the expenditure required to run the government until the new government presents a full budget. Avoids major policy announcements Detailed presentation covering all expenditures planned for the entire fiscal year, announcements of new policy initiatives and changes in taxation policy.

 

On June 27, the President of India addressed the joint session of the parliament in which she mentioned policies and achievement of the government over the past ten years, form infrastructure to energy, women empowerment to education, from connectivity to rural development and many more. During her address, she mentioned ‘many historic steps will also be seen in this budget’. Budget 2024 is expected to primarily focus on welfare and continuing with the reforms agenda. Several key priorities such as tackling agricultural issues, creating jobs, maintaining capital expenditure, fiscal consolidation, green energy, are on government radar. According to us, following are some point that could be addressed in this budget.

Rationalization of Lock-in Period: Indian economy is growing at solid pace but only few engine of economy are thrusting at max potential and many firing below potential. For a strong economy credit need o flow but banks are experiencing a slowdown in growth and profit margins even after having higher interest rates, due to lag behind deposits. Tighter liquidity, rising funding costs, savers running to financial market to earn greater return than fixed deposit have hit their net interest margins. Market participant expect rationalization of Lock-in Period of holding for specified investments like fixed deposits with banks or post offices, NSC, Equity Linked Savings Scheme ('ELSS') are eligible for deduction u/s 80C subject to the specified lock in periods ranging from 3 (for ELSS) to 5 years (for NSC and fixed deposits).

The manufacturing sector contributes around 14% to India's GDP and MSME contribute 40% of India's industrial production and 42% of exports. The Indian government is expected to revive the concessional corporate tax rate of 15% for new manufacturing facilities and even introduce PLI scheme for other sectors. The scheme, launched in 2019, lapsed after the extended deadline ran out on March 31, 2024. The move comes amid efforts to shift focus from low-paid agricultural activities to high-paying manufacturing jobs, seen as pivotal for economic resilience and global competitiveness.

Bringing fuels under GST regime: Two prominent Union Ministers have expressed their intention of bringing fuel under GST regime. The government has been taking various steps and emphasizing on changing countries fuel tracks on gas-based and green fuel economy. The industry is seeking regulatory reforms to stabilize price of fuel by bringing it under the GST and side by side increase investment opportunities in oil exploration. Likewise for airlines, aviation jet fuel amounts to nearly 40% of an airline's total expenses. So the aviation industry is expecting policy interventions to ease business and reduce the tax burden on the sector.

For salaried class: Although the government has made new tax regime the default tax regime but people are allowed to file under old tax regime. The salaried class expects Section 80C Deduction Limit investment limit to be increased form Rs 1.5 lakh to Rs. 2 lakh. People expects tax exemption limit to be increased to Rs 5 lakh. Additionally in order to promote housing for all, the deduction on interest on home loans is expected to be increased from Rs 2 lakh to Rs 3 lakh.

Ease of doing business: The Union Budget is also reportedly focusing on improving the ease of doing business this year by decriminalising over 100 provisions across multiple laws, including the Income Tax Act, in the second edition of the Jan Vishwas Bill. The Jan Vishwas bill replaces criminal proceedings and imprisonment for minor offences with monetary penalties, increasing the speed and efficiency of the justice system.

Focus on fiscal consolidation: The 2024 Budget aims to boost India's economic growth through strategic fiscal reforms. It increases capital expenditure to Rs 11.1 lakh crore, targeting 3.4% of GDP, and aims to generate employment opportunities. The budget maintains fiscal prudence with a 5.1% deficit.

Green energy and taxation: Expectations for the Union Budget 2024 are high regarding green taxation initiatives. As India works towards its climate goals, there is a growing emphasis on leveraging green taxes to help the environment. There’s an expectation of the introduction of a carbon tax on high-emission industries, aimed at incentivising the adoption of cleaner technologies while generating revenue for sustainable projects. It also prioritizes environmental sustainability through green technologies and renewable energy investments. The budget addresses skill gaps and equity issues, aiming to become a developed nation by 2047.

Logistics Sector: India's logistics sector is on the verge of transformative growth, with the new National Logistics Policy. The National Logistics Policy in 2022 under PM Gati Shakti National Master Plan aims to reduce logistics costs from 14% of GDP to 8-10% of the GDP.  The logistics industry is anticipating further focus on dedicated corridors for ports and railways, reducing transportation costs by 15% to 20%. Additionally, leveraging AI to streamline customs, improve warehousing, and optimize supply chains is crucial. The logistics industry has great hopes as the Union Budget 2024 draws near, with significant infrastructural expenditures to improve efficiency, such as building multimodal logistics parks and designated freight corridors.

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