Context: Recently, the Union Budget 2024-25 was presented in the Parliament which had been the first general budget of the 18th Lok Sabha. 

• As outlined in-the Interim Budget, the focus of the budget remains on four major groups: 'Garib' (Poor), 'Mahilayen' (Women), 'Yuva' (Youth), and 'Annadata' (Farmers) . 

Budget Focus and Priorities

• Main focus areas:

1. Employment

2. Skilling

3. MSMEs

4. Middle class

The Union Budget 2024-25 was presented by Finance Minister Nirmala Sitharaman on July 23, 2024, her seventh consecutive budget.

• The budget is significant as it surpasses the record of six consecutive budgets presented by Morarji Desai.

• This budget presentation is a quinquennial event in India, typically occurring once every five years. Because Union Budget is presented twice:

1. first as an interim budget by the outgoing government and,

2. Then as a full budget by the newly-formed government.

Constitutional Reference:

• The Budget is referred to as the Annual Financial Statement in the Constitution (Article 112).

• The budget is a statement covering estimated expenditure and receipts for the Government of India in a financial year.

Historical Context:

• The Government of India had two separate budgets (railway and general budget) until 2016.

• The railway budget was merged with the general budget in 2016, scrapping a 92-year-old practice.

Economic Overview

• India's economic growth remains strong despite global uncertainties

• Inflation is low and stable, moving towards the 4% target

• Core inflation (non-food, non-fuel) is at 3.1%

Fiscal Management

• Total receipts (excluding borrowings): Rs 32.07 lakh crore

• Total expenditure: Rs 48.21 lakh crore

• Net tax receipts: Rs 25.83 lakh crore

• Fiscal deficit: 4.9% of GDP

• Gross and net market borrowings through dated securities: Rs 14.01 lakh crore and Rs 11.63 lakh crore respectively

• Aim to reach deficit below 4.5% by next year

Budget Theme:  

• The Union Budget 2024-25 emphasises employment, skilling, support for MSMEs, and the middle class. A significant allocation of Rs 1.48 lakh crore is earmarked for education, employment, and skilling. 

Package of PM’s five schemes for Employment and Skilling

Prime Minister’s Package of 5 Schemes and Initiatives for employment, skilling and other opportunities for 4.1 crore youth over a 5-year period.

• Scheme A - First Timers: One-month salary of up to `15,000 to be provided in 3 installments to first-time employees, as registered in the EPFO.

• Scheme B - Job Creation in manufacturing: Incentive to be provided at specified scale directly, both employee and employer, with respect to their EPFO contribution in the first 4 years of employment.

• Scheme C - Support to employers: Government to reimburse up to `3,000 per month for 2 years towards EPFO contribution of employers, for each additional employee.

• New centrally sponsored scheme for Skilling

• 20 lakh youth to be skilled over a 5-year period.

• 1,000 Industrial Training Institutes to be upgraded in hub and spoke arrangements.

• New Scheme for Internship in  500 Top Companies  to 1 crore youth in 5 years

Budget Priorities

• The Finance Minister said, for pursuit of ‘Viksit Bharat’, the budget envisages sustained efforts on the following 9 priorities for generating ample opportunities for all. 

• Priority 1: Productivity and Resilience in Agriculture:  

• Measures include releasing new 109 high-yielding crop varieties, promoting natural farming among 1 crore farmers, establishing 10,000 need-based bio-input bio-input centres, and enhancing production, storage, and marketing of pulses and oilseeds (achieve‘atmanirbharta’ for oil seeds). 

• A provision of Rs 1.52 lakh crore has been announced for agriculture and allied sectors this year. 

• Government along with the states, will facilitate the implementation of the Digital Public Infrastructure (DPI) in agriculture for coverage of farmers and their lands in 3 years. 

• Priority 2: Employment & Skilling:  

• The budget introduces schemes like Employment Linked Incentive and initiatives to boost skilling with a focus on skilling 20 lakh youth over a 5-year period and upgrading 1,000 Industrial Training Institutes.  

• Financial support for higher education and loans for skilling are also announced. 

• The Model Skill Loan Scheme will be revised to facilitate loans up to Rs 7.5 lakh with a guarantee from a government promoted fund, which is expected to help 25,000 students every year. 

• Priority 3: Inclusive Human Resource Development and Social Justice:  

• Enhanced support for economic activities among marginalised groups, including tribal communities and women entrepreneurs, is emphasized.  

• The government's Purvodaya initiative aims to comprehensively develop the eastern region of India- including Bihar, Jharkhand, West Bengal, Odisha, and Andhra Pradesh, focusing on human resource development, infrastructure enhancement, and economic growth to advance towards a developed nation. 

• The Finance Minister announced the launch of the Pradhan Mantri Janjatiya Unnat Gram Abhiyan to enhance the socio-economic conditions of tribal communities, covering 63,000 villages in tribal-majority areas and aspirational districts, benefiting approximately 5 crore tribal people. 

• Over 100 branches of India Post Payment Bank will be established in the North East region to enhance banking services, alongside a provision of Rs 2.66 lakh crore allocated for rural development and infrastructure this year. 

• Priority 4: Manufacturing & Services:  

• The budget emphasises support for MSMEs, focusing on labour-intensive manufacturing, with a new self-financing guarantee fund offering up to Rs 100 crore per applicant.  

• Public sector banks will enhance their internal assessment capabilities for MSME credit. Additionally, Mudra loan limits will increase to Rs 20 lakh for previous 'Tarun' category borrowers.  

• The budget also includes initiatives like setting up 50 food irradiation units, establishing 100 food quality labs, and creating E-Commerce Export Hubs.  

• Furthermore, a scheme for internships in 500 top companies aims to benefit 1 crore youth over 5 years. 

• Priority 5: Urban Development

• PM Awas Yojana Urban 2.0, has been allocated Rs 10 lakh crore to address housing needs of 1 crore urban poor and middle-class families, with Rs 2.2 lakh crore in central assistance over 5 years.  

• The government will also collaborate with State Governments and Multilateral Development Banks to promote water supply, sewage treatment, and solid waste management in 100 large cities through bankable projects.  

• Additionally, building on the success of PM SVANidhi, the government plans to establish 100 weekly street food hubs (haats) annually over the next five years. 

• Priority 6: Energy Security

• PM Surya Ghar Muft Bijli Yojana aims to install rooftop solar plants for free electricity to 1 crore households (up to 300 units every month).  

• Nuclear energy is highlighted as a significant part of India's energy mix. 

• Priority 7: Infrastructure:  

• Government will try to maintain strong fiscal support for infrastructure over the next 5 years on this line Rs 11,11,111 crore for capital expenditure has been allocated this year, which is 3.4%  of our GDP. 

• Phase IV of Pradhan Mantri Gram Sadak Yojana (PMGSY) to connect 25,000 rural habitations with all-weather roads due to population growth has been announced.  

• For Bihar, under the Accelerated Irrigation Benefit Programme and other sources, the government will allocate Rs 11,500 crore for projects like the Kosi-Mechi intra-state link and 20 other schemes including barrages, river pollution abatement, and irrigation.  

• Additionally, financial assistance will be provided to Assam, Himachal Pradesh, Uttarakhand, and Sikkim for flood management, landslides, and related projects. 

• Priority 8: Innovation, Research & Development:  

• The government will establish the Anusandhan National Research Fund to support basic research and prototype development, allocating Rs 1 lakh crore to spur private sector-driven research and innovation at a commercial scale.  

• To expand the space economy fivefold in the next decade, a venture capital fund of Rs 1,000 crore will be established. 

• Priority 9: Next Generation Reforms:  

• Plans for an Economic Policy Framework, labour reforms, and simplification of FDI regulations are outlined to spur economic growth. 

• Jan Vishwas Bill 2.0 to improve Ease of Doing Business will be introduced by the government.

Highlights for Tax Collection

• Indirect Taxes

• GST: Buoyed by GST’s success, tax structure to be simplified and rationalized to expand GST to remaining sectors.

Sector specific customs duty proposals

• Medicines and Medical Equipment: Three cancer drugs namely TrastuzumabDeruxtecan, Osimertinib and Durvalumab fully exempted from custom duty.

• Changes in Basic Customs Duty (BCD) on x-ray tubes & flat panel detectors for use in medical x-ray machines under the Phased Manufacturing Programme.

• Precious Metals: Customs duties on gold and silver reduced to 6 per cent and that on platinum to 6.4 per cent.

• Telecommunication Equipment: BCD increased from 10 to 15 per cent on PCBA of specified telecom equipment.

• Trade facilitation: For promotion of domestic aviation and boat & ship MRO, time period for export of goods imported for repairs extended from six months to one year.

• Time-limit for re-import of goods for repairs under warranty extended from three to five years.

• Critical Minerals: 25 critical minerals fully exempted from customs duties.

• BCD on two critical minerals reduced.

• Solar Energy: Capital goods for use in manufacture of solar cells and panels exempted from customs duty.

Direct Taxes

• Efforts to simplify taxes, improve taxpayer services, provide tax certainty and reduce litigation to be continued.

• 58 percent of corporate tax from simplified tax regime in FY23, more than two-thirds taxpayers availed simplified tax regime for personal income tax in FY 24.

Simplification and Rationalisation of Capital Gains

• 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.

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.

Employment and Investment

• Angel tax for all classes of investors abolished to bolster start-up ecosystem.

• Corporate tax rate on foreign companies was reduced from 40 to 35 per cent.

Deepening tax base

• Security Transactions Tax on futures and options of securities increased to 0.02 per cent and 0.1 per cent respectively.

• Income received on buy back of shares in the hands of the recipient to be taxed.

Social Security Benefits

• Deduction of expenditure by employers towards NPS to be increased from 10 to 14 percent of the employee’s salary.

• Non-reporting of small movable foreign assets up to Rs 20 lakh de-penalised.

Other Important Initiatives

• NPS Vatsalya: New pension plan for minors

• Review of New Pension Scheme (NPS) in progress

• Comprehensive review of Income Tax Act to reduce disputes and simplify

• Digitalization of remaining services of Customs and Income Tax

• Economic Policy Framework to be formulated for next generation reforms

• Labour-related reforms: Integration of e-shram portal, revamping of Shram Suvidha and Samadhan portals

• Development of taxonomy for climate finance

Conclusion

• The Union Budget 2024-2025 focuses on inclusive growth, with emphasis on agriculture, employment, skilling, and social development. It introduces significant tax reforms and aims to boost various sectors of the economy while maintaining fiscal prudence. The budget sets ambitious targets for infrastructure development, energy security, and innovation, laying the groundwork for India's vision of becoming a developed nation.