Finance Minister Sets Nine Priorities for the Budget
The Finance Minister outlined nine key priorities for the budget, emphasizing that the interim budget had promised a comprehensive roadmap for a developed India. In line with the strategy set in the interim budget, this budget envisions continuous efforts to create ample opportunities for everyone through the following nine priorities:
- Employment and skilling
- Productivity and resilience in agriculture
- Inclusive human resource development and social justice
- Manufacturing and services
- Support for promotion of MSMEs
- Urban development
- Energy security
- Infrastructure
- Innovation, research, and development
Stock Markets React Negatively to Budget
Meanwhile, the benchmark indices Sensex and Nifty fell after Finance Minister Nirmala Sitharaman announced an increase in Securities Transaction Tax (STT) on Futures and Options (F&O) securities. The 30-share BSE Sensex surged as soon as Finance Minister Nirmala Sitharaman presented the 2024-25 budget. However, within minutes, it slipped into the red and later fell by 1,266.17 points to 79,235.91 during afternoon trading.
Corporate Tax for Foreign Companies Reduced to 35%, Revisions in Charity and Cruise Operations Taxation
Simplifying the tax regime for corporate industries, Union Finance Minister Nirmala Sitharaman proposed new tax structures for charity, foreign shipping companies, and rationalization of capital gains in her 2024 budget speech on Tuesday. She also reduced the corporate tax for foreign companies from 40% to 35%. Ms. Sitharaman’s speech lasted nearly ninety minutes. “In 2022-23, 58% of corporate tax came from the simplified tax regime, and over two-thirds of taxpayers used the new personal tax regime last year,” Ms. Sitharaman announced.
Government Reduces Customs Duty on Gold, Silver, Mobile Phones
Finance Minister Nirmala Sitharaman proposed a 6% cut in the basic customs duty on gold and silver and a 6.4% cut on platinum. In her budget speech in the Lok Sabha, she also proposed a 15% cut in the basic customs duty on mobile phones and mobile chargers. She also provided exemptions from customs duty on 25 critical minerals. The minister announced the removal of basic customs duty on ferronickel and blister copper while increasing it from 10% to 15% on specified telecom equipment.
Amendments to the New Tax Regime
The Finance Minister announced revisions in the tax rate structure under the new tax regime. The tax rate is zero from ₹0 to ₹3 lakh; 5% from ₹3 lakh to ₹7 lakh; 10% from ₹7 lakh to ₹10 lakh; 15% from ₹10 lakh to ₹12 lakh; 20% from ₹12 lakh to ₹15 lakh; and 30% for ₹15 lakh and above. The Finance Minister said this would enable salaried employees to save up to ₹17,500 annually on income tax.
What the Union Budget Says About Personal Income Tax
The government announced the withdrawal of the 2% equalization levy. Presenting the 2024-25 budget in the Lok Sabha, Finance Minister Nirmala Sitharaman said the standard deduction for salaried employees would be increased from ₹50,000 to ₹75,000 under the new income tax regime for FY25. The government also increased the deduction limit for employers’ contributions to the National Pension System (NPS) from 10% to 14%.
For those opting for the new tax regime, the standard deduction for salaried employees will be increased from ₹50,000 to ₹75,000. Similarly, the deduction for family pension for pensioners will be increased from ₹15,000 to ₹25,000. The Finance Minister said this would provide relief to about 4 crore salaried and pensioner individuals.
Finance Minister Nirmala Sitharaman Announces Special Plans for Bihar
In the Union Budget 2024-25, Finance Minister Nirmala Sitharaman unveiled several initiatives for Bihar as part of a larger scheme called “Purvodaya,” aimed at facilitating the development of Eastern India. This scheme includes the holistic development of states like Bihar, Jharkhand, West Bengal, Odisha, and Andhra Pradesh.
Special Plans for Andhra Pradesh in the Union Budget 2024-25
In her budget speech, Finance Minister Nirmala Sitharaman announced a special financial assistance package of ₹15,000 crores for the development of Andhra Pradesh. On July 23, 2024, in New Delhi, she emphasized, “Our government is fully committed to completing the Polavaram project swiftly, as it is a lifeline for Andhra Pradesh and its farmers.”
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Key Proposals in the Finance Bill
The Finance Bill includes significant proposals such as the withdrawal of the 2% equalization levy, extending tax benefits to certain funds and entities in the IFSC, and changes to the enforcement of the Benami Transactions Act.
Increase in Securities Transaction Tax on Futures and Options Contracts
The Finance Minister announced that the securities transaction tax on futures and options contracts would be increased to 0.2% and 0.1%, respectively. The income from buyback of shares will be taxed in the hands of the recipient. The tax deduction on NPS contributions will be raised from 10% to 14% of the salary, covering both government employees and private companies in the NPS.
Simplification of Capital Gains Taxation
The Finance Minister proposed a major simplification of capital gains taxation. Short-term gains on certain financial assets will now attract a 20% tax, while existing rates will apply to all other assets. “To benefit the lower and middle-income groups, I propose increasing the exemption limit for capital gains on certain financial instruments to ₹1.25 lakh per year. Non-listed bonds and debentures, debt mutual funds, and market-linked debentures will be taxed on capital gains regardless of the holding period,” she added. The Minister proposed decriminalizing delays in TDS payments until the filing due date. The TDS rate on e-commerce operators will be reduced from 1% to 0.1%. Simplification of reopening assessments and returns: the timeframe is now limited to three years if the involved income is ₹50 lakh or more, with a six-year limit. The budget proposes a review of the Income Tax Act, 1961, within six months to make it easier to read. The government will introduce SOPs for TDS defaults and streamline compounding for such offenses.
Merging Tax Exemption Schemes for Charitable Trusts
The Finance Minister announced merging two tax exemption schemes for charitable trusts into one. Additionally, 58% of corporate tax revenue in FY23 came from the simplified tax regime, and over two-thirds of individuals benefited from the new income tax regime. Further, the Minister announced the development of DPI apps for credit, e-commerce, education, health, law, MSME service delivery, and urban governance.
Angel Tax Eliminated for Investors
To strengthen the Indian startup ecosystem, the Finance Minister proposed eliminating the so-called Angel Tax for all categories of investors.
Duty Exemption for Three Cancer Drugs
In terms of customs duties, the Finance Minister proposed a full exemption for three additional cancer drugs. She also suggested changes in basic customs duties on X-ray tubes and flat panel detectors for domestic X-ray machine production.
Fiscal Deficit Estimated at 4.9% of GDP
For this year, net tax receipts are estimated at ₹25.83 lakh crore, with a fiscal deficit estimated at 4.9% of GDP. Gross and net market borrowings through dated securities are estimated at ₹14.01 lakh crore and ₹11.63 lakh crore, respectively, which is lower than the previous year. The Minister reaffirmed the government’s commitment to fiscal consolidation, aiming to reduce the deficit to below 4.5% of GDP by 2025-26 and continue reducing thereafter. She mentioned that GST has reduced compliance burdens and logistics costs for businesses and increased revenue. The government will work to simplify and rationalize the tax structure and expand GST to cover more goods.
Allocation of ₹2 Lakh Crore for Employment of 41 Million Youths Over Five Years
The Finance Minister proposed providing employment to around 41 million youths over the next five years, with an allocation of ₹2 lakh crore. Additionally, ₹1.48 crore was proposed to equip citizens with skills to create employment opportunities. Over five years, 20 million youths will receive skill training, and 1,000 industrial training institutes will be upgraded. The proposal includes a one-time salary for all first-time employees across sectors through direct benefit transfer (DBT). The government plans to provide internship opportunities to one million youths in 500 companies over five years, with interns receiving a stipend of ₹5,000 per month. Companies will bear 10% of the training and internship costs from their CSR funds. The Minister emphasized the focus on employment, skill development, and MSMEs.
Finance Minister on Land Reforms
In the budget, a significant portion of the 50-year interest-free loan is proposed to be allocated to states in collaboration with the central government to work on the following reforms: land reforms in both urban and rural areas, including land administration, planning, urban planning, and building regulations. “For rural land-related activities, this will include the allocation of a unique ID for all land, digitization of terrestrial maps, land surveying, and the establishment of land registries. Regarding labor reforms, our government will facilitate various services for workers, including employment and skills,” she stated.
She further mentioned that an open architecture database would be created to connect potential employees with the industry, adapting to the dynamically changing job market. The Labor Facilitation and Solution Portal will be revamped to ease compliance for industry and trade.
Continued Emphasis on Expanding the Space Economy: Finance Minister
The Finance Minister announced the establishment of a ₹1,000 crore venture capital fund to expand the space economy fivefold over the next ten years, emphasizing the government’s continuous commitment. “We will outline an economic policy framework to sustain high growth with next-generation reforms. These reforms will cover all factors of production, including land, labor, and capital, requiring cooperation between the center and the states,” she said.
Tourism: Finance Minister
“Tourism has always been an integral part of our civilization. Our efforts to establish India as a global destination will also create jobs and open opportunities in other sectors. I propose the development of corridors at the Vishnupath Temple in Gaya and the Mahabodhi Temple in Bodhgaya, which hold immense spiritual significance, similar to the successful Kashi Vishwanath Corridor,” the Finance Minister said. She added that comprehensive development initiatives would be undertaken for Rajgir and Nalanda in Bihar. “We will support tourism in Odisha, which boasts natural beauty, temples, craftsmanship, natural landscapes, wildlife sanctuaries, and ancient beaches,” she added.
Provision of ₹2.66 Lakh Crore for Rural Development in the Budget
Finance Minister Nirmala Sitharaman announced an allocation of ₹2.66 lakh crore for rural development, including rural infrastructure. She also stated that three crore additional houses would be constructed under the PM Awas Yojana in both rural and urban areas. While presenting the 2024-25 budget in the Lok Sabha, she said, “This year, I have allocated ₹2.66 lakh crore for rural development, including rural infrastructure.”
Flood Mitigation Plans Exclude Southern States
The Finance Minister mentioned that Bihar frequently faces floods, many of which originate outside the country. “Plans to address these issues in Nepal have not progressed. We will provide ₹11,500 crore for flood mitigation projects. Assam faces annual floods from the Brahmaputra River and its tributaries, which originate outside India. We will support them. Uttarakhand, Sikkim, and Himachal Pradesh, affected by landslides and floods, will also receive assistance.”
New Phase of PM Gram Sadak Yojana
The Finance Minister announced the commencement of Phase 4 of the PM Gram Sadak Yojana to provide all-weather roads to 25,000 rural settlements.
Encouraging Private Investment in Infrastructure
The Finance Minister stated that the central government has made significant investments in infrastructure in recent years, yielding manifold benefits. “This will continue for the next five years. This year, I have provided ₹11,11,111 crore for capital expenditure, which is 3.4% of the GDP. We will encourage states to develop infrastructure based on their priorities with similar levels of assistance.” She added that private investment in infrastructure would be promoted through viability gap funding, and a market-based financing framework will be introduced.
Advanced Ultra-Supercritical Thermal Power Plants Developed Domestically: Finance Minister
Research and development will focus on small nuclear reactors, partnering with the private sector to establish mini reactors and develop new technologies for nuclear energy. Advanced ultra-supercritical thermal power plants, known for their high efficiency, have been developed domestically. The Finance Minister mentioned that with necessary financial assistance from the government, an 800 MW commercial plant will be set up.
Roadmap for Tough Industries
A roadmap will be prepared for hard-to-abate industries, addressing both energy efficiency and emission targets.
Launch of Rooftop Solar Scheme
A document outlining suitable energy transition pathways will be introduced, balancing employment and development needs. Following the interim budget announcement, the Rooftop Solar Scheme has been launched to provide 1 crore families with up to 300 units of free electricity per month. The scheme has seen 1.8 crore registrations and 14 lakh applicants so far.
Possible Reduction in High Stamp Duty
“High stamp duty might be reduced, especially for women. This reform will be made a mandatory condition for urban development plans,” the Finance Minister said.
Support for Developing 100 Weekly Markets or Street Food Hubs Over Five Years
Building on the PM Svanidhi scheme for street vendors, a plan is proposed to promote 100 weekly markets in selected cities over the next five years, the Finance Minister announced.
Water Supply and Sanitation
In partnership with states and MDBs, the NDA government led by Modi will promote water supply, sewage treatment, and solid waste management projects in 100 major cities, the Finance Minister announced.
PM Awas Yojana – Urban
Under PM Awas Yojana – Urban, housing needs of 1 crore poor and middle-class families will be addressed with an investment of ₹10 lakh crore. This includes ₹2.2 lakh crore in central assistance over the next five years.
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