This is the second time we are covering an Interim Budget. And the main highlight of this Interim Budget, like any other Interim Budget, is that there is not much to highlight on taxation changes (of course, the previous Interim Budget being an exception, where there were a few taxation changes). Though, that does not mean that it was a “nothing” budget as there were quite a few important announcements to keep doing what the honorable Finance Minister has been doing throughout her tenure - Structural changes, Fiscal consolidation and “Capex, capex and capex” literally. In short - continue on the current path for now and leave any new measures, direction etc for the next Finance Minister, post the May 2024 Central Elections. This has been called out in this specific statement that we quote from Budget Speech:
“In the full budget in July, our Government will present a detailed roadmap for our pursuit of ‘Viksit Bharat’.”
Let us now get into the key highlights & proposals, followed by our take on it.
Key Highlights:
Green Initiatives & Tourism:
Rooftop Solar Power generation scheme announced by the honorable PM on 22 January 2024 aims to cover 1 Crore households, with setups that can generate upto 300 units of electricity every month. This will effectively make the power consumption “free” to that extent for these households. Any surplus can be utilised for selling back to the power distribution companies or charging the electric vehicles.
Few measures for wind power, coal gasification, blending of compressed biogas in CNG / PNG were also announced.
Continued support is announced for promoting the EV ecosystem as well as promoting adoption of e-buses for public transport.
A new scheme for bio-manufacturing / bio-foundry will be launched, to promote environment friendly products. This is a structural shift from the current consumptive manufacturing to regenerative manufacturing.
Few measures are announced to improve domestic tourism, including spiritual tourism to create another multiplier effect. Tourism infra, rating mechanisms, financing in the industry will be promoted, with special focus on port connectivity, to focus on tourist destinations like Lakshadweep.
Housing & Healthcare:
Government is working on a scheme to enable the middle class to own a house - be it buying or constructing one.
Rural PM Awas Yojana is already close to achieving the target of 3 crore houses and the target has been increased by another 2 crore houses across next 5 years.
Government will encourage Cervical Cancer Vaccination for girls in the age group of 9 to 14 years.
Healthcare cover under Ayushman Bharat scheme will be extended to all ASHA workers, Anganwadi Workers and Helpers.
Agriculture & Fisheries:
Existing initiatives in post-harvest activities including aggregation, modern storage, efficient supply chains, primary and secondary processing and marketing and branding will be encouraged by promoting more public and private investments.
With the help of agri research and modern farming techniques, high yielding varieties of various key oilseeds will be promoted in order to achieve “Atmanirbharta” / self reliance in oilseeds. This is furthering the initiative launched in the 2022 Budget.
There is a target to improve the productivity in aquaculture and double the seafood exports to INR 1 lakh crore. 5 Integrated aquaparks will be setup.
Digital Infra:
This is one out of the few major highlights of this budget, sort of a first of its kind for India - A corpus of INR 1 lakh crore will be established with a 50 year loan. This corpus will provide long-term financing / refinancing with long tenors and low or nil interest rates. This is announced to provide a big push to innovation and research in the new age technologies / domains. To add more context from our side - if we look at this, combined with the various upskilling initiatives for youth, like Future Skills Prime, should give a major boost to a field, many of us may have been complaining about, but not any more - “we need more innovators!”
A new scheme will be launched for strengthening deep-tech technologies for defence purposes and expediting “Atmanirbharta”.
Railways:
In a major push in Railways, alongside the development of dedicated freight corridors, 3 major railway corridors have been announced:
Energy, mineral & cement corridors - for smooth movement of respective goods;
Port connectivity corridor to improve connectivity between major ports;
High traffic density corridors - to enhance capacity and improve travel time on busy routes. This is expected to improve speed as well as safety.
40,000 normal rail bogies will be upgraded to Vande Bharat bogie standards.
Expansion of Metro rail and NaMo Bharat will be supported in large cities.
Economic Performance:
Based on the experience in the last 5 years, where all of us have witnessed a massive multiplier effect in the economy as a result of increasing capital expenditure (Capex) by the Government, it has been taken a step further for the year 2024-25. The Capex is proposed to be increased by 11.1% to INR 11.11 lakh crore, making it 3.4% of the GDP (for context, this was 3.3% of GDP last year).
Capital expenditure on Railways is 2.55 lakh crores and that on Defence is 6.2 lakh crores.
Fiscal deficit for FY 2023-24 stands at 5.8% of GDP (against estimate of 5.9%). It is estimated to be 5.1% of GDP for FY 2024-25. Aiming to improve upon previous budget announcements, the goal is to bring the Fiscal deficit below 4.5% of GDP, by FY 2025-26.
Government is aiming to keep the gross and net market borrowing for FY 2024-25 at levels less than FY 2023-24 which is again quite an aggressive stance.
Taxation Proposals:
As most of you might already be aware by now - there are no proposals for direct or indirect tax for FY 2024-25, being an interim budget. However, there is 1 noteworthy announcement here (amongst a few updates about reforms in past 5 years):
Outstanding tax demands of upto INR 25,000, for a time period upto FY 2009-10 shall be withdrawn.
Likewise, outstanding tax demands of upto INR 10,000, for a time period from FY 2010-11 upto FY 2014-15, shall be withdrawn.
This is expected to eliminate various such small demands which are there on the books of the Department, but are small, disputed, possibly even non verified / non reconciled, but causing troubles to honest taxpayers. This is expected to benefit 1 Crore taxpayers, as per the records.
Our quick take here - based on our experience with our clients, as well as amongst our peer group, quite a few such small demands have already been offset against refunds by now. But it seems as per the official data, quite a lot of such demands are still outstanding - those taxpayers will stand to benefit.
Certain tax benefits to start-ups and investments made by sovereign wealth or pension funds as also tax exemption on certain income of some IFSC units expiring on 31 March 2024, have been extended upto 31 March 2025.
Also, if you would like to understand the New Tax Regime vs Old Tax Regime comparison, here is the link to our blog post on last year’s budget highlights.
Conclusion (Our view):
As we see above, there are quite a few structural initiatives that are expected to be continued, objectives furthered as also, new reforms being worked upon. Additionally, we think, we are witnessing those rare instances, where the Government is going quite aggressive on fiscal consolidation - beating their own estimates as well as setting bigger targets - which again most probably will be beaten by actuals. This will genuinely strengthen the economy.
These initiatives provide a lot of potential for various individuals and businesses to grow, as the economy grows and strengthens. For those into investing, one can get ideas about where the next big scope of growth lies.
However, we have not gone into much detail about those, in terms of detailed impacts and benefits of these announcements as, being primarily a tax consultancy, focused on individuals / small businesses mainly, our aim is to cover as many taxation aspects as possible - which are minimal this time. We hope that we struck the right balance between necessary information and necessary detail, to keep our clients and readers in general, informed about this Interim Budget for FY 2024-25.
Footnotes:
Link to Budget Speech, Finance bill.
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