Union Budget 2024-25: Key Highlights on Economy and Taxation

The new NDA Government at the Centre announced its first Budget for the FY 2024-25, and 7^th one in a row presented by the present Finance Minister. The Budget touches upon several socio-economic issues in the backdrop of buoyant Indian economy being projected by various agencies and also so endorsed in the Economic Survey which was laid in the Parliament on 22 July, 2024.

The Budget aims to focus on employment, skilling, MSMEs, and the middle class. The Budget has identified 9 priority areas for the Government. For enhancing ‘Ease of Doing Business’, Government is working on the Jan Vishwas Bill 2.0. Further, states will be incentivized for implementation of their Business Reforms Action Plans and digitalization. The net tax receipts are estimated at Rs. 25.83 lakh crore. The fiscal deficit is estimated at 4.9 per cent of GDP.

The FM stated that GST has decreased tax incidence on the common man; reduced compliance burden and logistics cost for trade and industry; and enhanced revenues of the central and state governments. It is a success of vast proportions. To multiply the benefits of GST, Government proposes strive to further simplify and rationalise the tax structure and endeavour to expand it to the remaining sectors.

In Customs, proposals for customs duties intend to support domestic manufacturing, deepen local value addition, promote export competitiveness, and simplify taxation, while keeping the interest of the general public and consumers surmount. It also aims to undertake a comprehensive review of the rate structure over the next six months to rationalise and simplify it for ease of trade, removal of duty inversion and reduction of disputes.

In Direct Taxes, Government shall continue its efforts to simplify taxes, improve tax payer services, provide tax certainty and reduce litigation while enhancing revenues for funding the development and welfare schemes of the government.

It also announced a comprehensive review of the Income-tax Act, 1961. The purpose is to make the Act concise, lucid, easy to read and understand. This will reduce disputes and litigation, thereby providing tax certainty to the tax payers. It will also bring down the demand embroiled in litigation. It is proposed to be completed in six months.

This piece provides a glimpse of major proposals in the Budget.

General

• The focus of budget is on EMPLOYMENT, SKILLING, MSMEs, and the MIDDLE CLASS
• Nine Budget priorities in pursuit of ‘Viksit Bharat’ are :

1. Productivity and resilience in Agriculture

2. Employment & Skilling

3. Inclusive Human Resource Development and Social Justice

4. Manufacturing & Services

5. Urban Development

6. Energy Security

7. Infrastructure

8. Innovation, Research & Development and

9. Next Generation Reforms

• For promoting women-led development, the budget carries an allocation of more than Rs. 3 lakh crore

Highlights of Economic Survey 2023-24

Following are the highlights of Economic Survey 2024-25 presented in the Parliament on 22.07.2024:

• GDP growth is projected at 6.5–7 percent for FY25
• Retail inflation decreased to 5.4 percent in FY24, down from 6.7 percent in FY23
• FDI remained resilient, despite a slight decline in new capital inflows to USD 45.8 billion in FY24 from USD 47.6 billion in FY23, reflecting broader global economic trends.
• The services sector grew by 7.6 percent in FY24, while the agriculture sector expanded by 4.18 percent over the past five years.
• Reserve Bank of India expects inflation to be 4.5 percent in FY 25 4.1 percent in FY 26.
• Any escalation of geopolitical conflicts in 2024 may lead to supply dislocations, higher commodity prices, reviving inflationary pressures and stalling monetary policy easing with potential repercussions for capital flows.
• Need to create 78.5 lakh jobs per year till 2030 to cater to non-farm sector rising work force.
• Need to provide and integrate quality and timely data for policy formulation and timely decision making.
• Suggests climate change and A1 to be new challenges
• States that licensing, inspection and compliances at all levels of Government continue to impose on businesses, is an onerous burden.
• Suggests faster on boarding – of digital land records and obtaining clearances for infra projects to avoid delay in land acquisition.
• Services contribute 55% to GDP – Services grew by 7.6% in FY 2024.
• Tax revenue rose in FY 2024 in terms of GDP – gross tax revenue growth was 11.7%, direct tax 6.5% and indirect taxes 5.2%.

Direct Taxes

• Efforts to simplify taxes, improve tax payer services, provide tax certainty and reduce litigation tobe continued.
• Enhance revenues for funding development and welfare schemes of government.
• 58 per cent of corporate tax from simplified tax regime in FY23, more than two-thirds taxpayersavailed simplified tax regime for personal income tax in FY 24.
• Simplification and Rationalisation of Capital Gains to include
  • Short term gains on certain financial assets to attract a tax rate of 20 per cent.
  • Long term gains on all financial and non-financial assets to attract a tax rate of 12.5 per cent.
  • Exemption limit of capital gains on certain financial assets increased to Rs. 1.25 lakh per year.
• In taxpayer services, all remaining services of Customs and Income Tax including rectification and order giving effect to appellate orders to be digitalized over the next two years.
• Litigation and Appeals
  • ‘Vivad Se Vishwas Scheme, 2024’ for resolution of income tax disputes pending in appeal.
  • Monetary limits for filing direct taxes, excise and service tax related appeals in Tax Tribunals, High Courts and Supreme Court increased to Rs. 60 lakh, Rs. 2 crore and Rs. 5 crore respectively.
• Safe harbor rules expanded to reduce litigation and provide certainty in international taxation.
• Major relief to 4 crore salaried individuals and pensioners in income tax
• Standard deduction increased from Rs. 50,000 to Rs.  75,000/- for those in new tax regime
• Angel tax abolished for all class of investors to boost start-ups and investments
• 5 per cent TDS on many payments merged to 2 percent TDS
• Revised tax rate structure in new regime

Salaried employee in the new tax regime stands to save up to Rs. 17,500/- in income tax.

GST and Other Indirect Taxes

• Overall tax structure to be simplified and rationalized to expand GST in other sectors.
• Amendment of Section 13 (3) of CGST Act, 2017 to provide for time of supply of services where the invoice is required to be issued by the recipient of services in cases of reverse charge supplies.
• Insertion of section 16 of the CGST Act, 2017 to relax the time limit to avail input tax credit as per section 16(4) of the CGST Act, retrospectively from 01.07.2017.
• Insertion of section 70(1A) of the CGST Act, 2017 to enable an authorised representative to appear on behalf of the summoned person before the proper officer in compliance of summons issued by the said officer.
• Insertion of section 73(12) of the CGST Act, 2017 so as to restrict the applicability of the said section for determination of tax pertaining to the period upto Financial Year 2023-24.
• Insertion of section 74(12) of the CGST Act, 2017 so as to restrict the applicability of the said section for determination of tax pertaining to the period upto Financial Year 2023-24.
• Insertion of common new section 74A for determination of tax.
• Insertion of Section 128A in the CGST Act so as to provide for a conditional waiver of interest and penalty in respect of demand notices issued under section 73 of the said Act for the Financial Years 2017-18, 2018-19 and 2019-20, except the demands notices in respect of erroneous refund.
• Exemption from GST Compensation Cess has been proposed on imports in SEZ by SEZ units/Developers for authorized operations w.e.f 1.7.2017.
• Customs duty reduction in select cancer related drugs and medical equipments.
• Customs duty reduced substantially on gold, silver and platinum.
• BCD reduced on mobile phones, other metals, specified plastics, electronics, chemicals, telecommunication equipment etc
• GST compensation cess exempted on imports in SEZ by SEZ units or developers for authorized operations.

Conclusion: The Union Budget 2024-25 introduces transformative measures to propel India’s economic growth and streamline its taxation system. By focusing on employment, skilling, MSMEs, and the middle class, the budget aims to create a more inclusive and resilient economy. The proposed tax reforms, including the reclassification of share buybacks and the simplification of capital gains tax, are set to provide greater tax certainty and reduce litigation. As India moves forward, these budgetary measures will play a crucial role in shaping the future of the nation’s economic landscape, fostering growth and stability.