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Is the “Budget 2024” the last budget of the current government before the national elections in 2024? What to expect?
As the financial year 2024-2025 approaches, Finance Minister Nirmala Sitharaman is set to present the interim budget on February 1, 2024.
This budget 2024 is crucial as it precedes the Lok Sabha Elections slated for April-May 2024.
Typically, in an election year, the focus shifts to an Interim Budget 2024 or a Vote on Account, which essentially authorises government spending for a limited period.
Unlike a full-fledged budget, which details extensive fiscal policies and tax changes, the interim budget 2024 is more about maintaining the status quo and ensuring the operational continuity of the government.
It serves as an interim authorisation for government expenditure, setting the stage for the next government’s financial agenda, which will be detailed in the full budget 2024 expected in July.
For those keen on understanding the government’s short-term economic direction, keep reading.
Income Tax
Budget 2024 is expected to bring notable changes in income tax, particularly focusing on ease and incentives for taxpayers.
80D deduction limit increase
A proposed increase in Section 80D deduction limits for medical insurance premiums is on the cards. For individuals, the limit may go up from ₹25,000 to ₹50,000, and for senior citizens, from ₹50,000 to ₹75,000. This change reflects rising healthcare costs and aims to encourage more comprehensive insurance coverage.
Simplifying TDS for home buyers
The process of deducting 1% TDS on property purchases over ₹50 lahks is likely to be streamlined, especially for Non-Resident Indian (NRI) sellers. This simplification can make property transactions smoother and more transparent.
Pension tax exemption for senior citizens
There’s a strong push for making pensions tax-free for senior citizens, enhancing old-age financial security. This move could significantly benefit the pension and life insurance sectors.
Mutual funds and ELSS
The budget 2024 might address the tax treatment for mutual funds and equity-linked saving schemes (ELSS), potentially offering more incentives for investors in these areas.
Capital gains tax reform
The government might simplify capital gains taxation, making it easier for investors to understand and manage. This includes unifying tax treatment for different types of securities and simplifying indexation provisions.
Bengaluru as a metro city for HRA
Bengaluru might finally be recognised as a metro city for income tax purposes, allowing residents to claim higher House Rent Allowance (HRA) deductions.
Policy and Economy
Here’s what to anticipate in budget 2024
Fiscal consolidation and growth
The focus is likely to remain on fiscal consolidation while aiming for stable economic growth. With the backdrop of an election year, the interim budget 2024 presented by Finance Minister Nirmala Sitharaman is expected to maintain a steady course without major policy upheavals.
Capex and infrastructure focus
A continued emphasis on capital expenditure (capex) is anticipated. Predictions suggest an increase in the capex target to around ₹11 lakh crore for FY25, reinforcing the government’s commitment to infrastructure development as a growth driver.
Managing fiscal deficits
Despite a stable economic landscape, challenges such as global economic slowdown and pressures in the agricultural sector are present. The government is expected to adhere to a fiscal deficit target of 5.3% of GDP for FY25, aligning with its fiscal consolidation roadmap.
Investment in sustainable energy
An expansion in investment in energy infrastructure, focusing on green and sustainable energy sources, is likely to be a key theme.
The private sector in infrastructure
Enhancing private sector participation in infrastructure projects is another expected highlight. This could open up new avenues for investment and development, contributing to economic growth and job creation.
Identified themes
Budget 2024 is set to reveal key themes that could shape the country’s economic path. Here’s a quick rundown of what to expect:
Focus on the bottom of the pyramid
Policies aimed at uplifting the bottom strata of society, including comprehensive insurance coverage, support for affordable housing, and women’s empowerment initiatives, are expected to be prioritised.
Manufacturing and green technologies
Continued emphasis on enhancing the domestic manufacturing base and support for clean and green technologies is likely. This may include modifications to existing production-linked incentive schemes and a push for indigenisation in sectors like defence.
Research and development
Increased budget allocation for R&D in high-tech manufacturing sectors such as semiconductors, medical devices, and clean technologies is anticipated, boosting competitiveness in these critical areas.
Trade facilitation and ease of doing business
Initiatives to promote transparency and streamline business operations, alongside accelerated digital adoption in trade, are likely to be featured, enhancing overall business efficiency.
Advancements in AI and space technology
There’s likely to be a push in AI (Artificial Intelligence) research and development, particularly in tax processes and promoting public-private partnerships. In space technology, incentives for space-grade components and digital public infrastructure for space data are expected.
Industries
Budget 2024 is expected to bring significant developments across various industries. Here’s what’s anticipated:
Agriculture
A major focus is on increasing digital adoption in agriculture. The industry, projected to reach a valuation of US$ 13.5 billion by 2023, is likely to see enhanced efficiency through tech-driven practices like crop mapping, precision farming, and the use of drones.
The government aims to foster agri-tech growth and encourage startups in rural areas through initiatives like Digital Public Agriculture Infrastructure and an Agriculture Accelerator Fund (AIF).
Education
The sector is looking towards enabling foreign investments and easing restrictions on foreign currency loans. Educational institutions are expected to benefit from improved funding avenues, aiding in infrastructure upgrades and the adoption of new technologies.
There’s also a push for expediting clearances for receiving foreign grants and donations.
Technology, media & telecommunications
Expectations include streamlining the Advance Pricing Agreement (APA) and Mutual Agreement Procedure (MAP) regulations.
This move aims to manage the backlog of APA applications and facilitate smoother operations in service sectors like software development and BPOs.
Consumer industry (FMCG, Retail)
Measures to promote investment and control inflation are anticipated. The government might focus on schemes to support small-scale retail and boost digital commerce, including investment in Open Network for Digital Commerce (ONDC) and digital infrastructure development.
In a nutshell
As we eagerly await the unveiling of Budget 2024, it’s clear that the focus will be on balancing immediate needs with long-term economic strategies.
Key areas like agriculture, education, technology, and consumer industries are set for significant developments, highlighting the government’s commitment to digital adoption, research and development, and sustainable growth.
With a focus on fiscal consolidation and infrastructure investment, the interim budget is set to establish a strong foundation for India’s economic journey in the coming year, particularly leading up to the Lok Sabha elections.
DISCLAIMER: This article is not meant to be giving financial advice. Please seek a registered financial advisor for any investments.
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