CONTENTS

1. Union Budget 2024-25

 Union Budget 2024-25

Context:

Recently, Union Budget 2024-25 was presented in the Parliament. It was the first general budget of the 18th Lok Sabha. 

Relevance:

GS III: Indian Economy

Dimensions of the Article:

1. Budget Theme
2. Budget Priorities
3. Budget Estimates 2024-25
4. Budget 2024-25: Tax Reforms and Simplification

Budget Theme

• Focus Areas:
  • Employment
  • Skilling
  • MSMEs
  • Middle Class
• Prime Minister’s Package:
  • Schemes: 5 initiatives to support employment and skilling
  • Target: 4.1 crore youth over 5 years
  • Central Outlay: ₹2 lakh crore
  • Allocation for 2024-25: ₹1.48 lakh crore for education, employment, and skilling

Budget Priorities

Priority 1: Agriculture Productivity and Resilience

• Review:
  • Comprehensive evaluation of agricultural research to boost productivity
• New Varieties:
  • Release of 109 high-yielding, climate-resilient crop varieties (32 field and horticulture crops)
• Natural Farming:
  • Introduce 1 crore farmers to natural farming over 2 years
  • Certification and branding support
• Bio-Input Resource Centers:
  • Establish 10,000 centers
• Self-Sufficiency in Pulses and Oilseeds:
  • Enhance production, storage, and marketing of mustard, groundnut, sesame, soybean, and sunflower
• Digital Public Infrastructure (DPI):
  • Implement DPI in agriculture with state partnerships over 3 years
• Funding for 2024-25:
  • ₹1.52 lakh crore for agriculture and allied sectors

Priority 2: Employment & Skilling

• Employment Schemes:
  • 3 schemes under the Prime Minister’s package focusing on EPFO enrollment, first-time employees, and support for employers and employees
• Women Workforce:
  • Establish working women hostels and creches in collaboration with industry
• Skilling Initiatives:
  • New scheme for skilling 20 lakh youth over 5 years
  • Upgrade 1,000 Industrial Training Institutes
  • Revise Model Skill Loan Scheme: Loans up to ₹7.5 lakh
• Higher Education Support:
  • Loans up to ₹10 lakh for higher education in domestic institutions
  • E-vouchers for 1 lakh students annually with 3% interest subsidy

Priority 3: Inclusive Human Resource Development and Social Justice

• Economic Support:
  • Enhance schemes for craftsmen, artisans, self-help groups, SCs, STs, women entrepreneurs, and street vendors (e.g., PM Vishwakarma, PM SVANidhi, National Livelihood Missions, Stand-Up India)
• Purvodaya Plan:
  • Development of eastern region (Bihar, Jharkhand, West Bengal, Odisha, Andhra Pradesh)
• Pradhan Mantri Janjatiya Unnat Gram Abhiyan:
  • Improve socio-economic conditions for tribal communities in 63,000 villages, benefiting 5 crore people
• Banking Expansion:
  • Set up 100 India Post Payment Bank branches in the North East
• Funding for 2024-25:
  • ₹2.66 lakh crore for rural development and infrastructure

Priority 4: Manufacturing & Services

• Support for MSMEs:
  • Guarantee fund up to ₹100 crore for MSMEs
  • Enhanced credit assessment and support during financial stress
• Mudra Loans:
  • Increase limit to ₹20 lakh for successful borrowers
• Food Irradiation and Quality Testing:
  • Support for 50 multi-product food irradiation units and 100 quality testing labs
• E-Commerce Export Hubs:
  • Establish in PPP mode to assist MSMEs and artisans
• Internships:
  • Provide internships in 500 top companies to 1 crore youth over 5 years

Priority 5: Urban Development

• Urban Housing:
  • PM Awas Yojana Urban 2.0: Address housing needs of 1 crore families with ₹10 lakh crore investment
  • Central assistance of ₹2.2 lakh crore over 5 years
• Water Supply and Sanitation:
  • Promote projects in 100 large cities with state and multilateral support
• PM SVANidhi Scheme:
  • Develop 100 weekly ‘haats’ or street food hubs annually

Priority 6: Energy Security

• PM Surya Ghar Muft Bijli Yojana:
  • Install rooftop solar plants to provide free electricity up to 300 units per month for 1 crore households
  • Over 1.28 crore registrations and 14 lakh applications received
• Nuclear Energy:
  • Significant role in future energy mix

Priority 7: Infrastructure

• Capital Expenditure:
  • ₹11,11,111 crore allocated (3.4% of GDP)
• Pradhan Mantri Gram Sadak Yojana (PMGSY):
  • Phase IV to provide all-weather connectivity to 25,000 rural habitations
• Irrigation and Flood Management:
  • Financial support for Bihar, Assam, Himachal Pradesh, Uttarakhand, and Sikkim for flood management and irrigation projects
  • Includes Kosi-Mechi intra-state link and other schemes

Priority 8: Innovation, Research & Development

• Anusandhan National Research Fund:
  • Support for basic research and prototype development with ₹1 lakh crore financing pool
• Space Economy:
  • Expand space economy by 5 times in the next 10 years
  • Set up ₹1,000 crore venture capital fund

Priority 9: Next Generation Reforms

• Economic Policy Framework:
  • Formulate framework for economic development and next-generation reforms
• Labour Reforms:
  • Integrate e-shram portal with other services
  • Revamp Shram Suvidha and Samadhan portals
• Climate Finance:
  • Develop taxonomy for climate finance to enhance capital availability
• Foreign Investments:
  • Simplify rules for FDI and overseas investments
• NPS Vatsalya:
  • Plan for minor’s contributions, convertible to normal NPS account
• New Pension Scheme (NPS):
  • Review and evolve solution maintaining fiscal prudence

Budget Estimates 2024-25

• Receipts and Expenditure:
  • Total receipts (excluding borrowings): ₹32.07 lakh crore
  • Total expenditure: ₹48.21 lakh crore
• Net Tax Receipts:
  • Estimated at ₹25.83 lakh crore
• Fiscal Deficit:
  • Estimated at 4.9% of GDP
• Market Borrowings:
  • Gross borrowings: ₹14.01 lakh crore
  • Net borrowings: ₹11.63 lakh crore
• Fiscal Consolidation:
  • Aim to reduce deficit below 4.5% next year

Budget 2024-25: Tax Reforms and Simplification

Review and Simplification of Taxes

• Direct and Indirect Taxes:
  • The Union Budget 2024-25 aims to review and simplify both direct and indirect taxes within the next six months.
  • Focus includes reducing tax incidence and compliance burdens and broadening the tax base.
  • Comprehensive rationalization of GST and review of Customs Duty rates to improve the tax base and support domestic manufacturing.
• Income Tax Act Review:
  • The Income Tax Act will be reviewed to minimize disputes, reduce litigation, and make the Act clearer and more concise.
  • Simplification efforts have been well-received, with over 58% of corporate tax revenue coming from the simplified regime in 2022-23.
  • More than two-thirds of taxpayers have shifted to the new personal income tax regime.

Standard Deductions and Tax Regime Changes

• Standard Deduction:
  • Increased from ₹50,000 to ₹75,000 for salaried employees opting for the new tax regime.
  • Deduction for family pensioners raised from ₹15,000 to ₹25,000.
• Assessment Reopening:
  • Assessments can be reopened up to 5 years from the end of the assessment year if escaped income exceeds ₹50 lakh.
• Revised Tax Rates:
  • New tax regime structure offers potential benefits up to ₹17,500 for salaried employees. Tax rates are as follows:

Support for Investment and Employment

• Angel Tax:
  • Abolished for all investors to boost the start-up ecosystem.
• Foreign Shipping Companies:
  • Proposed a simpler tax regime for domestic cruise operations.
• Foreign Mining Companies:
  • Safe harbor rates introduced for selling raw diamonds in India.
• Corporate Tax Rate:
  • Reduced from 40% to 35% for foreign companies to attract foreign capital.

Simplification of Tax Regime

• Charities:
  • Two tax exemption regimes for charities to be merged into one.
  • TDS rates streamlined: 5% TDS to be merged into 2%, and 20% TDS on mutual fund repurchases withdrawn.
• TDS and Capital Gains:
  • TDS on e-commerce reduced from 1% to 0.1%.
  • Credit of TCS allowed on TDS from salary.
  • Decriminalization of TDS payment delays up to the due date of filing.
  • Short-term capital gains tax at 20% and long-term gains at 12.5%.
  • Capital gains exemption limit increased to ₹1.25 lakh per year.

GST and Customs Duties

• GST:
  • Acknowledged as a significant success for reducing tax incidence and compliance burden.
  • Plans to simplify and expand GST coverage to more sectors.
• Custom Duties:
  • Three cancer medicines exempted from custom duties.
  • Reductions in Basic Customs Duty (BCD) for various items including mobile phones, rare earth minerals, and seafood.
  • Duty increases for certain items like ammonium nitrate and PVC flex banners to support domestic industries and environmental concerns.

Dispute Resolution and Litigation Reduction

• Vivad se Vishwas Scheme 2024:
  • Proposed for resolving income tax disputes.
  • Increased monetary limits for appeals in High Courts, Supreme Courts, and tribunals.
  • Expansion of safe harbor rules and streamlining of transfer pricing assessment procedures to reduce litigation and provide clarity in international taxation.