Railways, defence to be in focus as FM gears to present Union Budget on July 23

The government needs to take steps such as reviewing personal income tax slabs in the upcoming Union Budget to drive private consumption, which in turn will drive private investment, Godrej & Boyce Executive Director & CEO, Anil G Verma said.

He also expressed optimism that the government will build upon the solid foundation laid by the interim budget, which focused on boosting infrastructure development, maintaining fiscal prudence, and laid progressive emphasis on women, youth, farmers, and the underprivileged through skilling, welfare measures and financial assistance.

"The important area that needs to be addressed now, amongst others, is the continued lower-than-expected growth in private consumption," Verma said in a statement.

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 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.

"Why have household savings plummeted to record lows and household debt shot up to record highs? Why have rural wages continued to fall and why is the wage share of national income declining?" he said, adding, why is manufacturing as a share of GDP at a record low and still decreasing?

"Why has the informal sector lost 17 lakh jobs in the last seven years? Why did unemployment reach a 45-year peak, with unemployment for young graduates at 42%?" the Congress general secretary said.

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 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.

In efforts to alleviate the impact of soaring fuel costs, the aviation sector has proposed tax deductions and rationalizations in its budget recommendations to enhance profitability. Additionally, the industry is advocating for airports to be classified under priority sector lending. India, ranking as the third-largest aviation market globally after the US and China, witnessed a significant rise in domestic air travelers, reaching 4.2 lakh daily in the fiscal year 2023-24, up from 1.85 lakh in 2014. Despite robust growth, profitability within the sector remains a concern. More here.

Jitendra Patel, Associate Partner, Indirect Tax, N.A. Shah Associates notes that taxpayers expectations from the union budget

--There has been huge initial cost for development of drugs in case of pharma industry which leads to blockage of working capital. It is expected from the government to provide relaxation / exemption for GST on these initial costs.

--MRO services in relation to Aircrafts are facing inverted duty structure in relation to ITC as GST in case of inputs higher than the GST in outward supply of MRO services. The company industry expects reduction in parts / components used during the providing MRO services.

--Clarification / valuation rules in relation to services provided by builders to SRA / government for construction of buildings against FSI granted by the SRA / government.

--Reduction in GST rates on health insurance policies. The said policies are treated a basic necessity of citizens in today’s era

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.

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.

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.

Apart from revising income tax slab rates, a significant demand from individual taxpayers is an increase in the Section 80C tax deduction benefits. Currently, Section 80C allows taxpayers to lower their taxable income by investing in a range of financial instruments or specified expenditures, up to a maximum of Rs 1.5 lakh. There is widespread anticipation that this limit will be raised in the upcoming budget. Read more here.

Gaura Sen Gupta, chief economist, IDFC First Bank says, the government's financial surplus has increased dramatically as a result of the RBI dividend. With a significantly lower H1FY25 calendar than anticipated, the Center has already lowered borrowings through Treasury bills.Despite a little increase in issuance in H2FY25, the total amount of T-bills issued for the year is probably closer to Rs 12000 crore. We forecast a 5 percent GDP fiscal deficit, which means we may cut net G-Sec (government security) issuance by Rs 33,000 crore to Rs 10.2 lakh crore.

- Finance Minister Nirmala Sitharaman concluded consultations with a wide range of stakeholders, including industry representatives and social sector leaders, in preparation for the upcoming Budget scheduled for July 23.

- In recent days, Sitharaman and officials from the Ministry engaged in discussions with various groups, including trade unions and farmer associations, to chart out strategies for different sectors and segments in the first Budget of the NDA 3.0 government. read more.

- 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.

- The Central government is actively considering expanding the reach of its Ayushman Bharat health insurance scheme to improve healthcare accessibility. Official sources have indicated plans to double the coverage over the next three years, starting with including all individuals aged 70 and above. There are also discussions to raise the annual insurance coverage from Rs 5 lakh to Rs 10 lakh per beneficiary.

- These proposed changes, projected to cost an additional Rs 12,076 crore annually according to estimates from the National Health Authority, are expected to be announced during the upcoming Union Budget presentation later this month.

The Budget Session of Parliament is scheduled to take place from July 22 to August 12, during which Finance Minister Nirmala Sitharaman will present the Union Budget 2023-25 on July 23. This will mark her seventh consecutive annual financial statement.

The Economic Survey is expected to be presented by the government on July 22, preceding the Union Budget. Notably, this will be the first complete budget of the Modi Government 3.0, following the interim budget presented on February 1, 2024, due to the Lok Sabha elections held from April to June.

Nirmala Sitharaman, who assumed office for her second consecutive term as the Minister of Finance and Corporate Affairs on June 12, has outlined various objectives and aspects of the Indian economy that will be addressed in the 2024 full budget.

- 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.

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.

Following a recent meeting between Andhra Pradesh Chief Minister N Chandrababu Naidu and Prime Minister Narendra Modi, the central government has reportedly agreed to a significant demand for establishing an oil refinery and petrochemical hub in the state. The project, anticipated to attract investments totaling Rs 60,000 crore, has been a focal point of discussions aimed at bolstering economic development in Andhra Pradesh.

According to a report by The Economic Times, discussions between Naidu and top officials from Bharat Petroleum Corporation Limited (BPCL) explored the feasibility of setting up the refinery at three potential locations: Srikakulam, Machilipatnam, and Ramayapatnam. Each site represents a distinct geographical segment of the state, adding political sensitivity to the decision-making process.

While the formal announcement of the refinery is expected during the Budget presentation scheduled for July 23, the finalization of the project's location may extend beyond this timeline. The initiative underscores the government's commitment to enhancing industrial infrastructure in Andhra Pradesh, with potential implications for economic growth and job creation in the region.

Goldman Sachs anticipates that the upcoming Budget will prioritize capital expenditure without compromising on fiscal consolidation. The firm is cautious about expecting any relaxation in fiscal targets or a shift towards increased welfare spending at the expense of capital expenditure, as outlined in a note released on July 8. They project the government will maintain the fiscal deficit target of 5.1 percent for FY25, with a potential further reduction to 4.5 percent by FY26.

- 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.

The upcoming Union budget for fiscal year 2024-25 is anticipated to prioritize capital expenditure, address rural demand, and provide assistance to state governments, according to Gaura Sen Gupta, chief economist at IDFC First Bank. Gupta highlighted that the interim budget maintained allocations for agriculture and rural sectors at 1.3 percent of GDP, suggesting potential increases in funding for initiatives like rural job guarantees, farmer support programs, and housing. Read more here.

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.

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.

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.

Finance Minister Nirmala Sitharaman is preparing to unveil her seventh complete budget on July 23. Known for her focus on fiscal discipline, substantial capital investment, and initiatives to promote self-reliance and bolster manufacturing, Sitharaman's past budgets have reflected these priorities.

The interim budget she presented in February defied expectations of populist measures typically seen in pre-election budgets, opting instead for a more restrained approach.