NEW DELHI — Prime Minister Narendra Modi's upcoming third-term Budget, scheduled for July 23, is set to prioritize leveraging revenue growth and Reserve Bank of India (RBI) dividends to fuel infrastructure development and targeted sectors.
Finance Minister Nirmala Sitharaman, poised to present her seventh consecutive Budget, aims to address key challenges such as inflation, unemployment, income inequality, and regional disparities through strategic tax measures and social benefits.
Key Highlights and Expectations-
1. Budget Focus and Legislative Session:
The Budget session for 2024 is scheduled from July 22 to August 12, with the Union Budget 2024-25 to be presented in the Lok Sabha on July 23. This session will introduce non-legislative reforms aimed at boosting economic resilience and growth.
2. Economic Survey and Government Priorities:
The Economic Survey, expected to precede the Budget, will highlight the Modi government's achievements over its first two terms and outline future plans. There is anticipation regarding the release of the government's 100-day agenda, which could influence Budget announcements significantly.
3. Fiscal Deficit Targets:
Sitharaman aims for a fiscal deficit of 4.5%, down from last year's 5.6%, against a revised estimate of 5.8% of GDP. Buoyant tax collections have exceeded expectations, potentially aiding in achieving this goal amid projected GDP growth of 7% for the year.
4. Targeted Spending and Economic Resilience:
The Budget is expected to include targeted spending to bolster the Indian economy and address critical areas necessary for medium-term resilience. Infrastructure investment, support for the middle class, women, and the agricultural sector are likely focal points.
5. Tax Measures and Social Security Benefits:
There are speculations about revisions in tax measures aimed at easing the burden on taxpayers, including potential increases in deduction limits under Section 80C and adjustments to the tax exemption limit. Social security benefits are also expected to be enhanced, particularly benefiting the middle class.
6. Legislative Approval Bypass with Reform Measures:
The government plans to introduce reform measures that bypass the need for legislative approval, reflecting a proactive approach to economic governance and policy implementation.
Income Tax Reforms:
Speculation surrounds potential reforms in India's income tax policies ahead of the upcoming Budget session. Among the expected changes is a possible increase in the deduction limit under Section 80C, proposed to rise from Rs 1.5 lakh to Rs 2 lakh. This adjustment aims to benefit taxpayers investing in life insurance premiums, Public Provident Fund (PPF), Fixed Deposits (FDs), and Equity Linked Savings Schemes (ELSS), among other financial instruments.
Additionally, there are anticipations of an increase in the tax exemption limit, potentially raising it to Rs 5 lakh from the current Rs 3 lakh. This move is seen as aligning with economic growth priorities and broader fiscal considerations.
To incentivize homeownership and bolster the real estate sector, discussions suggest a potential increase in the deduction limit under Section 24(b) for interest on home loans, from Rs 2 lakh to Rs 3 lakh. Such a measure aims to enhance affordability and support personal finances, especially in the housing market.
Revisions in the rules governing House Rent Allowance (HRA) exemptions for non-metro cities are also expected. These adjustments could impact individuals relocating to urban areas, potentially influencing housing choices and financial planning strategies.
Moreover, there's a proposal to establish a Social Security Fund aimed at providing a minimum pension of Rs 9,000 to unorganized and agricultural workers. Efforts to reintroduce the Old Pension Scheme (OPS) are also on the agenda, aiming to strengthen social security for retirees.
Investor sentiment and market participation in equity investments are anticipated to receive a boost through potential changes in Long Term Capital Gains (LTCG) tax policies. These adjustments are expected to be unveiled as part of broader efforts to stimulate economic growth and enhance investor confidence.
GST Amendments:
Recent discussions within the GST Council have centered around several amendments aimed at enhancing transparency and reducing tax burdens across various sectors. One significant development includes the introduction of Aadhaar-based biometric authentication to curb fraudulent claims of input tax credit. This measure is expected to improve compliance and transparency in GST transactions.
Another key proposal under consideration is the inclusion of petrol and diesel under the GST ambit. However, the final decision hinges on achieving consensus among states regarding the applicable tax rates for these essential commodities.
In a move to make rail travel more affordable, platform tickets have been exempted from GST. This exemption is part of broader efforts to reduce the tax burden on passengers and enhance the accessibility of railway services.
Small taxpayers have benefited from an extended deadline for filing GSTR-4, providing them with additional time to comply with GST regulations and easing compliance burdens.
Furthermore, the GST Council has decided to waive interest and penalties for cases not involving fraud or misstatements. This decision aims to provide relief to taxpayers facing compliance issues under GST regulations.
Hostel services provided outside educational institutions have also received a GST exemption up to Rs 20,000 per person per month. This exemption aims to make hostel accommodation more affordable and accessible, particularly for non-student residents.
Additionally, GST rates on certain items, such as carton boxes, have been reduced from 18% to 12%. This reduction is intended to lower costs for consumers and manufacturers alike, supporting economic activity across various sectors.
These anticipated reforms and amendments reflect ongoing efforts to streamline tax policies, promote economic growth, and enhance compliance within the GST framework ahead of the upcoming Budget session.