Budget 2024 Highlights: Edtech firms hopeful for tax incentives to boost affordability of online learning

"The interim Union Budget will be presented ahead of the general elections and the full budget will be presented later. Since Political continuation is expected at a broader level we expect the government to continue its focus on infrastructure to develop ports, airports, railways, and highways, all of which play a pivotal role in advancing the nation's economic development. Additionally, investments in renewable energy and initiatives aimed at promoting financial inclusion, supporting growth and development," said Anil Rego, CEO and Fund Manager at Right Horizons.

The Halwa ceremony, marking the final stage of the Budget preparation process for Interim Union Budget 2024, was held in North Block, today, the finance ministry has said. Finance and Corporate Affairs Minister Nirmala Sitharaman and Minister of State for Finance Bhagwat Karad were present along with senior bureaucrats from the finance ministry.

"A customary Halwa ceremony is performed every year before the 'lock-in' process of Budget preparation begins," the finance ministry said.

As part of the halwa ceremony, Sitharaman also took a round of the Budget Press and reviewed the preparations besides extending her best wishes to the officials concerned, the finance ministry said.

"Anticipating the interim and full budget, we foresee a sustained emphasis on growth and infrastructure. The impending general elections may prompt populist announcements, shaping a positive trajectory for sectors such as infrastructure, manufacturing, and FMCG. The budgetary focus on these areas is expected to fuel momentum, aligning with broader economic objectives. Observing these trends closely will provide valuable insights into the government's strategic priorities and their potential impact on key sectors. We expect the growth and infrastructure focus to continue in the interim and full budget," said Divam Sharma, founder and fund manager at Green Portfolio.

"The upcoming Vote on Account—Interim Budget 2024 is a pivotal event for investors. Key expectations include a continued focus on fiscal consolidation to maintain investor confidence and long-term economic stability. Support for critical sectors like infrastructure, agriculture, and healthcare is anticipated to boost these areas and create jobs. Additionally, measures to address inflation and rationalize tax policies could stimulate investments and incentivize businesses, setting a positive tone for the year," said Sonam Srivastava, Founder and Fund Manager at Wright Research, PMS.

- As the government endeavors to decrease the fiscal deficit to 4.5 percent by FY26, analysts predict that the BJP government will emphasize infrastructure spending in line with the goal of reducing the fiscal deficit from the FY24 target of 5.9 percent of GDP.

- Experts propose that the government's belief in the possibility of re-election is likely to prevent them from implementing populist measures in the Interim Budget, enabling a sustained emphasis on investments in infrastructure.

- The upcoming Interim Budget, slated to be presented by Union Finance Minister Nirmala Sitharaman on February 1, is expected to include a budget allocation for the recently introduced rooftop solar scheme for households, known as the Pradhan Mantri Suryoday Yojna.

- Read the exclusive report, here.

- Accelerating capital expenditure, speeding up the divestment process, and expanding the scope of the PLI scheme are some of the proposals put forward by the Confederation of Indian Industry (CII) for the upcoming Interim Budget 2024.

- The industry body shared its Budget wishlist underlining steps that will propel India's economy towards the developed economy goal by 2047.

- Read full wishlist here.

- Edtech firms express hope for potential tax incentives and benefits in the interim budget. They contend that a decrease in Goods and Services Tax (GST) rates on digital educational content and services could enhance the affordability of online learning, proving advantageous for both students and edtech companies.

- The government may extend the concessional 15 percent income tax rate for corporates to set up new manufacturing units by one year till March 31, 2025, to encourage private investments, EY said in its 2024 Budget expectation report.

- Telecom infrastructure providers are seeking availability of input tax credit on telecom towers, and have made a plea for an increase in tax depreciation rate and rationalisation of TDS provisions in their Budget wishlist.

- The players under the aegis of Digital Infrastructure Providers' Association (DIPA) said measures to facilitate ease of doing business will increase investment and contribute to the industry's long-term growth.

- Economists predict that Finance Minister Nirmala Sitharaman might unveil a target of approximately 5.3 percent of GDP for the 2024-25 fiscal year during the upcoming interim budget.

- The government is on the brink of a transformative shift in its flagship health scheme, Ayushman Bharat, with plans to potentially double insurance cover under the Pradhan Mantri Jan Arogya Yojana (PM-JAY) to Rs 10 lakh from Rs 5 lakh.

- This move aims to include coverage for critical ailments like cancer and transplants, acknowledging the increasing financial burden associated with these medical conditions.

- Details here

- All India Gaming Federation Spokesperson Roland Landers said, "“there have been significant regulatory strides in the online gaming sector, and we anticipate progressive allocations to be made towards the sector in the upcoming union budget, including towards the implementation of IT Rules for online games and the establishment of self-regulatory bodies."

- "Additionally, we look forward to budgetary allocations aligned with the AVGC policies, in line with the recommendations of the AVGC Task Force's report from the Ministry of Information and Broadcasting," he added.

- The agriculture sector stood strong during the coronavirus pandemic, growing by 5.1 percent on average in 2019-20 and 2020-21.

- If not for the farm sector, the economy would have contracted by far more than the average 1 percent in each of the two aforementioned years.

- More here.

- India’s energy sector is expecting the upcoming budget to keep cleaner fuels such as green hydrogen and natural gas at the forefront.

- The oil and gas sector expects some reforms for city gas distribution (CGD) players to boost the consumption of natural gas in the country.

The Indian benchmark indices are witnessing a subdued trend on January 24, marked by volatility following a significant fall in the Bank Nifty, which witnessed a sharp decline of 1,200 points in the January 24 trading session.

Looking ahead, market participants are closely monitoring the upcoming Interim Budget 2024, slated to be unveiled by the Finance Minister on February 1. As we approach this pivotal event, Soni Patnaik, Assistant Vice President – Derivatives Research at JM Financial, provides her insights into the pre-budget positioning, Read here

During the current financial year, the central government allocated Rs 1.3 lakh crore to states in the form of 50-year, interest-free loans under the Scheme for Special Assistance for Capital Investment. Out of this amount, Rs 1 lakh crore is allocated to states based on their share of central taxes and duties as per the 15th Finance Commission's award. The remaining amount is linked to state reforms, such as the scrapping of old government vehicles and ambulances, waiver of liabilities on old vehicles, and urban planning reforms, among others. The CII has recommended that the central government maintain the fiscal deficit target of 5.9 percent of GDP for FY24 but reduce the gap to around 5.4 percent for the next financial year.

The Confederation of Indian Industry (CII) has recommended that the central government expand its support to state capital expenditure (capex) by providing interest-free loans of up to Rs 1.6 lakh crore over 50 years, which is an additional Rs 30,000 crore. The CII suggests that some of this support should be linked to state reforms.

Although the government had earmarked Rs 7.5 lakh crore for capital expenditure in FY23, it was increased to Rs 10 lakh crore for FY24. However, as of November 2023, the government's total expenditure was down 14% YoY at Rs 2.58 lakh crore, with capital expenditure up a mere 2% at Rs 38,721 crore. The Centre has fallen behind the run-rate needed to meet its record full-year capex target of Rs 10 lakh crore, with the figure for April-November standing at Rs 5.86 lakh crore, or 58.5% of the target.

The Confederation of Indian Industry (CII) has recommended that the central government should increase its capital expenditure by 20% to Rs 12 lakh crore in the next financial year. This is in line with the government's efforts to drive growth and crowd in the private sector, as it has spent heavily on capital expenditure in recent years. Spending on capex is expected to increase by 15-20% in 2024-25.

Capital gains tax is levied on gains made by selling movable and immovable capital assets. The long-term or short-term capital gains tax is levied, depending on the period of holding an asset.

Various asset classes, such as real estate, equity investments, debt instruments, and mutual funds, attract different rates of capital gains tax. Besides, the capital gains tax could differ within the same asset class, depending on the holding period and maturity.

The Interim Budget for 2024-25 provides an opportunity to simplify the treatment of capital gains.

To begin with, the government should standardise the qualifying holding period for long-term capital gains (LTCG) across all financial assets, including listed and unlisted securities – both debt and equity, units of mutual funds, units of REITs/InvITs, etc., to 12 months.

The new income tax regime has been one way to lower individuals’ tax burden by paying lower tax rates.

Last year, the tax slabs and rates of the new regime were rejigged, introducing the standard deduction of Rs 50,000 for salaried taxpayers and pensioners and a tax rebate on incomes of up to Rs 7 lakh. There is a case for the basic exemption limit to be raised both in the new and old tax regimes in line with inflation.

The new tax regime is unlikely to become popular unless the old regime is made less attractive. For this, the new regime should have broader tax slabs, lower taxes, and few exemptions.

This Budget could be an opportunity to present a simpler individual income tax slab and rate construct, replacing the dual structure in place since 2020.

Read more, here

On Wednesday, the Apparel Export Promotion Council (AEPC) requested tax incentives such as uniformity in GST and increased interest subsidies to improve domestic manufacturing and increase India's exports. The council urged the government to provide tax benefits to apparel manufacturers who adopt international quality standards and compliances such as Environmental, Social, and Corporate Governance (ESG). They also asked for budgetary support to promote and market made-in-India products. The Budget is set to be presented on February 1.

The narrative of capital expenditure (capex) plays a crucial role in sustaining economic growth. The idea is that it should encourage private investment, but this effect may not be immediate. Therefore, it is important to continue focusing on infrastructure, both physical and social. This includes investing in defence, roads, and railways. State governments are also contributing significantly to capital spending. To support their efforts, fiscal transfers for capex are essential. I believe that the budget allocation for interest-free 50-year loans to the states will be maintained in the upcoming budget.

The fiscal deficit target for FY25 will be around 5.2-5.5%. The Interim Budget will present realistic projections for disinvestment proceeds, and focus on capital expenditure. In FY24, the 5.9% fiscal deficit to GDP ratio will be difficult to achieve due to weaker nominal GDP growth and disinvestment shortfall. Tax buoyancy is a better option than expenditure compression for achieving fiscal consolidation. A prelude budget with fiscal austerity measures before general elections can be detrimental.

Amidst the current volatile stock markets and upcoming general elections, the Interim Budget 2024 holds great significance. The present macroeconomic uncertainties and stock market volatility can be attributed to a number of factors, such as geopolitical uncertainties due to war, energy price volatility with Brent oil rising to $78.51 per barrel, risks in the Red Sea, longer trade routes via Cape of Good Hope leading to associated delays in consignments, and uncertainties surrounding the US Fed Reserve announcements in February. The key question then is how to boost investor confidence and secure the consent of voters in the upcoming 2024 general elections. However, achieving these twin goals goes beyond the scope of just the Interim Budget 2024, Lekha Chakraborty writes.

DIPA notes that telecom is a sunrise sector that provides affordable and quality-assured communication services. Its members include Summit Digitel, American

Towers, Indus Towers, Ascend Telecom, Cloud Extel, Pratap Technocrats, Crest Digitel, Signotox Towers, Applied Solar Technologies, iBUS Networks, and Suyog Telematics.

DIPA in a release said the telecom infrastructure industry is seeking government support for the availability of input tax credit on telecom towers, increase in tax depreciation rate to 65 per cent from 15 per cent on batteries for industrial and commercial use to ensure cost recovery within three years' economic life of the batteries. Other demands include rationalisation of TDS provisions on purchase of electricity and purchase of diesel, according to a release by the industry association.

Telecom infrastructure providers, under the Digital Infrastructure Providers' Association (DIPA), have requested an increase in tax depreciation rate and rationalisation of TDS provisions in the upcoming Budget. They are also seeking the availability of input tax credit on telecom towers. DIPA believes that such measures will facilitate ease of doing business, attract more investment, and contribute to the long-term growth of the industry.

India is expected to remain the fastest-growing major economy this year and next, as per a Reuters poll of economists. The country's growth will continue to be supported by strong government spending, and inflation is unlikely to surge again. In the first two quarters of this fiscal year to end-March, India performed better than expected, with the government increasing its already-strong spending to boost growth momentum. Over the past few years, much of Prime Minister Narendra Modi's government spending has been focused on building infrastructure, while private investment and job creation have lagged, indicating that New Delhi will continue to play a significant role in India's economic growth. According to the Jan. 10-23 Reuters poll of 54 economists, the Indian economy is predicted to grow 6.9% this fiscal year, up slightly from 6.7% in the previous poll in December. It is expected to expand 6.3% next fiscal year, which is the same as in the previous poll.

India achieved several milestones in its space sector in 2023, such as the soft landing of Chandrayaan-3, launch of Aditya L1 space observatory, testing of crew escape module for Gaganyaan, launch of second-generation satellite in NavIC series, and the start of LIGO-India project. The country's research ecosystem, including various departments, ministries, higher education institutions, and university education system, requires funding support from the government to sustain the growth of both mission-oriented programs and day-to-day science. Although, according to Dinesh C Sharma, India's national spending on science and technology is increasing in absolute terms, it still lags behind in R&D funding as a proportion of the GDP when compared to the global benchmark.

Sudhakar Sethuraman of Deloitte India believes that people's expectations of ease of compliance are always increasing. This is especially true since tax authorities have started using technology to simplify tax return filing and related processes. As a result, the budget may introduce several changes to improve ease of compliance. For example, foreign mobile numbers may be used for e-verification, tax payments may be made without Indian bank accounts, tax refunds may be sent to overseas bank accounts, TDS procedures for buying immovable property from an NRI seller may be simplified, additional information may be included in the Annual Information Summary (AIS), and so on.

In the Budget of 2023, the life insurance industry faced a setback due to the removal of the tax-free status for maturity proceeds of high-value endowment policies. Starting from April 1, 2023, maturity proceeds of newly purchased traditional policies with an annual premium of over Rs 5 lakh will no longer enjoy this critical tax benefit.

Life insurance companies are hoping that the government will reconsider this rule. "The industry has requested a review of the Rs 5 lakh cap and has urged the government to consider increasing it to Rs 10 lakh. We may see some changes in this regard," says Sumit Rai, MD and CEO of Edelweiss Tokio Life.

A total of 7.78 crore income tax returns were filed in 2022-23, which is an increase of 6.5 percent from the previous year. The majority of income tax returns were filed by individuals, with 7.33 crore returns filed by this category in 2022-23.

The net direct tax collections, which is the amount collected after refunds, increased significantly by 160.52 percent to Rs 16.63 lakh crore in FY 2022-23 from Rs 6.39 lakh crore in FY 2013-14, as stated by CBDT in a statement.

The government spent Rs 8,452 crore on collecting direct taxes in 2022-23, which is an increase from Rs 7,479 crore in 2021-22. The efficiency of tax collections improved, with the cost of collection decreasing to 0.51 percent of total collections in 2022-23 from 0.53 percent in the previous year.

According to data released by the Central Board of Direct Taxes, the contribution of direct taxes, which mainly includes corporate tax and personal income tax, to the total tax collections has reached pre-pandemic levels. In the fiscal year 2022-23, direct taxes accounted for 54.62 percent of the government's total tax revenue, up from 52.27 percent in the previous year, and 46.84 percent in 2020-21 - the lowest in 15 years.

The government plans to reduce the fiscal deficit to 4.50% of GDP by the end of the 2025-26 fiscal year, despite increasing capital expenditure to a record high. According to a recent Reuters poll of economists, infrastructure investment will be a top priority. As it is an election year, the budget is expected to strike a balance between populist measures and fiscal responsibility. The Feb.1 budget is projected to aim for a reduction in the fiscal deficit to 5.30% of GDP in 2024-25.

Customs duty: Customs duty inversions on key items may be corrected to support the Make in India initiative.
National Pension Scheme: The government may announce steps to promote and make the NPS more attractive.
Capital gains: An expert expects the capital gains bond limit to be raised to Rs 1 crore. The current limit for tax exemption on capital gains bonds is Rs 50 lakh.
Infrastructure: The interim budget is expected to prioritize rural and urban connectivity, railways, ports, aviation, and highways.
GDP: Economists predict that Finance Minister Nirmala Sitharaman might unveil a target of approximately 5.3 percent of GDP for the 2024-25 fiscal year.

India's direct tax-to-GDP ratio has reached a 15-year high of 6.11 percent in the financial year 2022-23, close to the peak of 6.3 percent attained in 2007-08. The Central Board of Direct Taxes (CBDT) released data indicating that direct taxes, mainly composed of corporate tax and personal income tax, contributed significantly to total tax collections, reaching pre-pandemic levels. In 2022-23, direct taxes accounted for 54.62 percent of the government's total tax revenue, up from 52.27 percent in 2021-22 and 46.84 percent in 2020-21, which was the lowest in 15 years.

Good morning and welcome to Moneycontrol's live coverage of Union Budget 2024 top news and headlines. Stay tuned for the latest updates and more!