Budget 2024 News Highlights: FM Sitharaman takes part in Halwa ceremony

The US-India Strategic Partnership Forum has urged Union Finance Minister Nirmala Sitharaman to ensure a stable and predictable tax environment as she prepares for her annual budget later this month.

The US-India Tax Forum, a dedicated Tax Policy Forum of the US-India Strategic Partnership Forum (USISPF), said this in a set of recommendations to Sitharaman.

In a press release by USISPF, the tax forum said that a stable and predictable tax environment is imperative to boost investment sentiment across sectors.

"The industry eagerly anticipates the Union Budget 2024-25, the first budget of the re-elected Government, which is expected to introduce measures that will stimulate growth across sectors," it said.

Higher outgoes on welfare schemes to support the sagging consumption growth will be among the key focus areas in the Union Budget to be presented next week, a domestic rating agency said on July 16.

The Budget will look at pushing consumption through higher allocation for the rural economy, welfare schemes and agriculture, Care Ratings said.

Welfare schemes may get a higher allocation in the budget, it said, specifying that there can be a Rs 75,000 crore rise in revenue expenditure compared to the allocation in the interim Budget presented earlier this year.

The government is expected to undertake higher allocations on employment guarantee programmes, PM Awas Yojana, PM Gram Sadak Yojana, PM Kisan Samman Nidhi and schemes related to labour-intensive small businesses, the agency said.

The halwa ceremony is a ritual in which traditional dessert 'halwa' is prepared and served to officials and staff members of the finance ministry who are involved in the preparation of the Budget.

It is organised in the basement of North Block, which houses the ministry in the national capital and is attended by the finance minister and other high-ranking officials.

Former World Bank chief economist Kaushik Basu has called on the Modi government to focus on the welfare of ordinary citizens and allocate more funds to the manufacturing sector in the upcoming Budget to boost small businesses and job creation. In an interview with PTI, Basu stressed the importance of shifting attention to ground-level economic welfare.

Basu said he hopes that the Union Budget for 2024-25, which Union Finance Minister Nirmala Sitharaman is set to present in the Lok Sabha on July 23, will prioritise the welfare of ordinary citizens rather than solely aim to increase aggregate GDP.

"I believe that the rich can afford to pay higher taxes, and using this money to incentivise the manufacturing sector can go a long way in boosting demand for labor, helping small businesses, and raising the income of ordinary people," he said.

Import holidays, GST exemption for components of launch vehicles, productivity-linked incentives (PLI) and government stepping in as a customer are some of the expectations of the private space sector from Finance Minister Nirmala Sitharaman as she presents the Union Budget next week.

"More money for space related acquisitions, tax holidays, import holidays, and PLI scheme for space," Pixxel Space co-founder and CEO Awais Ahmed told PTI.

Industry bodies Indian Space Association (ISpA) and Satcom Industry Association (SIA-India) have sought greater government expenditure on the space sector in the form of an anchor customer for the nascent private sector.

TDP chief and Andhra Pradesh Chief Minister Chandrababu Naidu is scheduled to visit the national capital again on Tuesday ahead of the Union Budget.

Last month Naidu was in New Delhi and met senior ministers, including Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman and BJP President JP Nadda. On Monday, JDU national working president Sanjay Kumar Jha also met Nirmala Sitharaman. Read full report here

Apparel exporters have sought fiscal incentives including cut in customs duties and fund support in the forthcoming Budget to boost the outbound shipments from the sector.

The Apparel Export Promotion Council (AEPC) suggested the government should increase the rates under the interest equalization scheme to 5 percent for all the apparel exporters for a period of five years.

Fertiliser stocks are buzzing in the run up to the Union Budget, as the market speculates on quantum of subsidies for the sector and measures to reduce dependence on imports.

With raw material prices having fallen, investors are not expecting any increase in fertiliser subsidies. The widely held view is that the Finance Minister will stick to the estimate outlined in the interim Budget. The interim Budget had estimated the fertiliser subsidy requirement for FY25 at Rs 1.64 lakh crore, which is lower than Rs 1.89 lakh crore for FY24. More here

The government has convened an all-party meeting on July 21 ahead of the Monsoon Session of Parliament which will start next Monday, sources said.

This will be Leader of Opposition and Congress MP Rahul Gandhi's first time at the customary session-eve meeting of floor leaders from all parties if he attends it.

Trinamool Congress sources said no representatives from the party will attend the meeting as July 21 is observed by the party as Martyrs Day.

The government is likely to lower fiscal deficit to 4.9-5 percent of the GDP for this financial year in the upcoming Budget aided by revenue buoyancy.

The government had pegged the fiscal deficit estimate at 5.1 percent for the current fiscal year when it presented the interim Budget in February.

“The union government is likely to set a fiscal deficit target at 4.9-5 percent, lower than projected 5.1 percent of GDP, without compromising the capital expenditure target of Rs 11.1 lakh crore,” ICRA Chief Economist Aditi Nayar.

Dr Harshit Jain, Founder & Global CEO of AI-powered healthcare marketing platform Doceree, expects Budget 2024-2025 to offer robust support for R&D in the pharma sector.

He said, “Budget 2024 is a defining moment for the pharmaceutical sector in India. We look forward to robust support toward R&D and innovation through higher fiscal incentives and reduced GST on critical inputs to spur growth, foster technological advancement, and further fortify India's leadership in global healthcare.”

Finance Minister Nirmala Sitharaman's interim budget for 2024, presented in February, did not address international credit card transactions under the Tax Collected at Source (TCS) framework. However, the upcoming Union Budget is expected to include these transactions, aligning them with other payment methods under the LRS. Notably, education and health expenditures abroad will continue to receive favorable TCS treatment, taxed at a fixed rate of 5 percent for amounts exceeding Rs 7 lakh.

The Society of Indian Automobile Manufacturers (SIAM) urged for incentives to boost electric vehicles (EVs) and proposed additional benefits for vehicle scrapping in the upcoming Budget. SIAM emphasized the importance of a growth-oriented budget with increased allocation for capital expenditure. SIAM President Vinod Aggarwal highlighted the need for a policy akin to FAME 3 and expressed confidence in the continuation of effective schemes like PLI. More here.

- Industry bodies are advocating for incentives to boost research and development (R&D) investments, corporate tax breaks, and the implementation of a robust intellectual property rights framework to foster growth in the domestic pharmaceutical sector.

- Anil Matai, Director General of the Organisation of Pharmaceutical Producers of India (OPPI), outlined these priorities ahead of the upcoming Union Budget, emphasizing the need for deductions on R&D expenditures, incentives tied to research activities for multinational corporations, and tax concessions for businesses.

Individual taxpayers are strongly advocating for a revision of income-tax slab rates. A major demand centers around increasing the Section 80C tax deduction benefits, which currently allow taxpayers to reduce their taxable income by investing in specific categories.

Presently, the Section 80C deduction limit stands at Rs 1.5 lakh. This deduction covers a variety of investments and spending categories. There is a widespread expectation that the government will raise this limit. The Section 80C limit was last reviewed in 2014 by the NDA government, with no changes made since then.

- Assocham has suggested structural reforms in the agriculture sector to enhance productivity, market access, and income opportunities for farmers.

- It also suggested promoting contract farming, investing in agri-infrastructure, facilitating value chain integration, and encouraging diversification into high-value crops.

• Educationists are hopeful that the first Budget of Modi 3.0 will see a significant increase in the allocation for the education sector with an emphasis on research. They have called for greater investment in research to foster innovation and keep pace with global advancements, stating that strengthening these capabilities is crucial for India’s growth in science, technology, and other critical areas.
• Enhanced funding in research and development is seen as essential for building a robust educational foundation that can drive the country towards a knowledge-based economy.

• As the final Budget of 2024 approaches, the market is abuzz with expectations and concerns. While many brokerages predict a continuation of current policies with a focus on capital expenditure, there is growing apprehension among market participants regarding a potential hike in capital gains tax.
• The prospect of changes in capital gains tax has sparked divided opinions among investors and analysts alike. This issue remains a focal point for many market veterans who are closely monitoring developments leading up to the Budget presentation on July 23.
• Samir Arora, founder of Helios Capital, recently cautioned against tightening the capital gains tax regime in a social media post. Drawing parallels with global examples, including China, Arora suggested that even progressive budgetary reforms could unsettle investors if tax policies do not align with market expectations.

• The upcoming Union budget is likely to keep the fertiliser subsidy at approximately Rs 1.64 lakh crore as estimated in the interim financial statement of the government, which is a significant reduction of over 13 percent from the previous year’s expenditure of Rs 1.89 lakh crore, a government official said.
• “The fertiliser subsidy allocation is likely to remain more or less the same in the Union budget as urea imports will be significantly lower this year with a boost in nano urea, and the global input prices are expected to be stable,” the official told Moneycontrol on condition of anonymity.

- A separate additional deduction for investment in the National Pension System (NPS) was introduced in FY16, allowing taxpayers investing up to Rs 50,000 in their NPS Tier I account to claim an additional deduction under Section 80CCD (1B) of the Income-tax Act.

- The Union government introduced NPS to provide individuals with a pension income to support their needs in retirement. The Pension Fund Regulatory and Development Authority (PFRDA) regulates and administers NPS under the PFRDA Act, 2013.

As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2024 on July 23, study abroad consultants are anticipating several key measures to enhance international education opportunities. These include increased focus on fostering partnerships with foreign universities, potentially reducing Goods and Services Tax (GST) on international qualifications, and facilitating easier access to educational loans. Read more here.

Aalok Kumar, Corporate Officer and Senior VP, NEC Corporation India states that the R&D sector is expecting clear and decisive provisions to advance Viksit Bharat in the upcoming budget. We are optimistic that this Union Budget will prioritize the adoption of digital technologies across critical sectors, particularly in governance, to create a more inclusive, efficient, and participative framework. While technology continues to drive India’s socio-economic progress, the key lies in building the nation into the knowledge capital of the world through enhanced R&D and innovation efforts. This will require continued and rigorous investments into the nation’s talent-pool through concerted training, skilling, and upskilling endeavours.

Chief economist at IDFC First Bank, Gaura Sen Gupta says government is likely to focus on capital expenditure, meeting rural demand and providing support to state governments.She said that allocation towards agriculture and rural areas was kept steady at 1.3 percent of GDP in the interim budget and there could be increased allocation towards schemes such as the rural job guarantee scheme, farmer-focused measures and housing. The allocation towards agriculture and rural was kept steady at 1.3 percent of GDP in the interim budget (same as FY24). There could be increased allocation towards schemes such as NREGA (referring to the rural job guarantee scheme under the Mahatma Gandhi National Rural Employment Guarantee Act), (farmer's income support scheme) PM Kisan and rural housing.

Gunjan Prabhakaran, Partner & Leader, Indirect Tax, BDO India shared views and speculations on pre-budget expectations from SEZ perspective. She said, the market expects union budget to provide clarity on the future of SEZ law (e.g. continuation of present SEZ Act or introduction of proposed DESH bill) specially in the context of the first 100 days plan of MOC with respect to changes in SEZ law (NFE, payment of input taxes rather than Customs duty on DTA supplies by SEZ, etc.) and the steps to generate economies of scale.

The government is likely to introduce amendments to Banking Regulation Act 1949 and other laws to push banking sector reforms during the upcoming Budget session.

Apart from this, amendments in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 are needed for privatisation of public sector banks, sources said.

These Acts led to the nationalisation of banks in two phases and provisions of these laws have to be changed for the privatisation of banks, they said. (PTI)

• The Congress party has said that the forthcoming Budget must address fundamental questions such as why private investment is "very sluggish" and private consumption is not picking up as the party dismissed claims that economic growth is accelerating sharply and large numbers of jobs being created.
• Congress general secretary, in-charge communications, Jairam Ramesh said, "The non-biological PM's cheerleaders and drumbeaters claim that economic growth is accelerating sharply and that jobs are being created in large numbers."
• "But if this was the case -- and it is not-- Why is private investment, a key engine of economic growth, still so very sluggish recording a 20-year low during April-June 2024?" Why is private consumption, another key engine of economic growth, not picking up except at the high end, Ramesh asked.

• Nomura predicts the government to lower its FY25 fiscal deficit target to 5 percent of the GDP, down from the 5.1 percent announced in the interim Budget.
• "Despite the increased financial demands of the two key allies (estimated to be around 0.2 percent of GDP in FY25), we expect the government to use the space afforded by higher RBI dividend (~0.4 percent of GDP) and lower FY24 fiscal deficit (~0.2 percent of GDP)," Nomura stated.

• The US-India Strategic Partnership Forum has urged Union Finance Minister Nirmala Sitharaman to ensure a stable and predictable tax environment as she prepares for her annual budget later this month.
• The US-India Tax Forum, a dedicated Tax Policy Forum of the US-India Strategic Partnership Forum (USISPF), said this in a set of recommendations to Sitharaman.
• In a press release by USISPF, the tax forum said that a stable and predictable tax environment is imperative to boost investment sentiment across sectors.

• Higher allocations are anticipated for the railway and power sectors, which could lead to increased order conversions.
• Order conversions slowed temporarily due to the Lok Sabha polls, but expectations are high for a rebound in the second quarter of the fiscal year.
• Significant opportunities are expected in infrastructure segments such as roads, railways, airports, seaports, waterways, and logistics.
• Companies like Larsen & Toubro (L&T), Bharat Heavy Electricals Limited, ABB India, and Siemens India are poised to benefit from these opportunities.

"I believe the forthcoming budget holds immense potential to catalyze growth and innovation in India's FMCG sector," said Ravi Kabra, Co-Founder of Skippi. "Our industry faces several challenges that require thoughtful policy interventions to overcome." Kabra emphasizes the need for strategic measures to address industry hurdles, fostering an environment conducive to sustainable growth and innovation in the FMCG sector.

• Since the new tax regime is now the default option, extending benefits to the old tax regime, where many employees still prefer to avail HRA exemptions and 80C deductions, would be a welcome move. An increase in the standard deduction from the current Rs 50,000 would offer further relief, Deloitte further noted.
• The rental market in major cities such as Bengaluru, Hyderabad, Pune, and Gurugram has seen a remarkable resurgence post-pandemic, with over 30 percent year-on-year growth in 2023. This surge, driven by the reopening of offices and the shift to hybrid work models, underscores the need to review HRA deductions.

The salaried class will be closely monitoring the upcoming full budget for FY25 in hopes of securing tax breaks amid rising living costs.

According to Deloitte, salaried individuals are looking for a revamp of tax slabs, adjustments to housing rent allowance (HRA) rates, incentives for electric vehicle (EV) sales, and a bigger push for affordable housing in the Budget 2024.

• The MSME sector has faced significant setbacks due to three major shocks: demonetisation, the implementation of Goods and Services Tax (GST), and the COVID-19 lockdown. As a result, it is crucial for this Budget to address the sector with a nuanced approach, considering its unique challenges.
• Previous Budgets have typically prioritised infrastructure development (CAPEX), skill-based programs, startup credit, and fiscal discipline to stimulate job creation. However, many of these initiatives have tended to favor high-value and export-oriented activities, neglecting the broader MSME segment's need for inclusive growth and employment generation.
• Moving forward, there is a growing consensus that the emphasis should shift from pursuing growth solely for its own sake to fostering avenues that promote both employment and inclusive economic growth. This adjustment is essential for ensuring that the benefits of economic progress extend to all segments of society, especially those within the MSME sector grappling with the aftermath of recent economic shocks.