Budget 2024 – What Are Popular Announcements, 10 Things You Need To Know

The Union Budget 2024, presented by Finance Minister Nirmala Sitharaman, aimed to foster economic growth and ensure stability. This budget encompasses a variety of reforms and measures that impact individuals, businesses, and the economy as a whole. Here, we delve into the ten most significant announcements, exploring their implications and how they shape India’s economic landscape.

1. Income Tax Structure

One of the most notable changes in the Union Budget 2024 is the restructuring of income tax rates, aimed at providing relief to taxpayers and simplifying the tax regime. For individuals with an annual income up to ₹3 lakh, no tax is payable. This threshold brings substantial relief to lower-income groups, fostering increased disposable income and consumption.

For income between ₹3 lakh to ₹7 lakh, the tax rate is set at 5%. This tiered approach ensures a progressive tax system, where higher incomes contribute more significantly. Those earning between ₹7 lakh to ₹10 lakh will now face an income tax rate of 12.5%, a notable increase from previous years. The highest tax rate of 30% applies to individuals with an annual income exceeding ₹15 lakh.

This restructuring aims to enhance compliance and reduce tax evasion. By lowering taxes on lower and middle-income groups, the government hopes to increase disposable income, thereby stimulating consumption and economic activity. However, the higher tax rates on upper-income brackets might impact their spending patterns and investment decisions.

2. Capital Gains Tax

The budget introduced higher rates for both long-term and short-term capital gains tax. Long-term capital gains tax has been increased from 10% to 12.5%, while short-term capital gains tax has risen from 15% to 20%. This change aims to generate additional revenue and ensure equitable taxation across different income sources.

The increase in capital gains tax rates may influence investment strategies, particularly in the stock market and real estate. Investors might reconsider long-term holdings and explore alternative investment options to mitigate tax liabilities. Additionally, this could lead to a short-term dip in market activity as investors adjust to the new rates.

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3. Adjustment of Customs Duty

To boost the jewelry sector and make precious metals more affordable, the government has reduced customs duty on gold and silver to 6% and on platinum to 6.4%. These reductions are intended to stimulate demand and support the growth of the jewelry industry.

Lower customs duties on precious metals will likely increase their affordability, encouraging more purchases and investments in gold, silver, and platinum. This move is expected to benefit the jewelry industry, enhance exports, and generate employment. Additionally, it may also curb smuggling and illicit trade in these metals.

4. Fiscal Deficit

The fiscal deficit for FY2025 is estimated at 4.9% of GDP, down from 5.1% in the interim budget. The government aims to further reduce the deficit below 4.5% in the following financial year. This focus on fiscal discipline reflects the government’s commitment to maintaining economic stability and investor confidence.

A lower fiscal deficit indicates prudent fiscal management and enhances India’s creditworthiness. It can lead to lower borrowing costs for the government, freeing up resources for developmental projects. However, achieving this target may require stringent expenditure controls and efficient revenue generation measures.

5. Capital Expenditure

The budget maintains the capital expenditure (capex) for FY2025 at ₹11.11 lakh crore, equivalent to 3.4% of GDP. This allocation underscores the government’s strategy to boost infrastructure development and stimulate economic growth.

Sustained investment in infrastructure projects will create jobs, improve connectivity, and attract private investments. It also supports the long-term goal of transforming India into a global manufacturing and logistics hub. However, effective implementation and timely execution of these projects are crucial for realizing these benefits.

6. Renewable Energy Sector

The budget provides exemptions from customs duties on lithium, copper, and cobalt, which are critical for the renewable energy sector. Additionally, customs duty exemptions are extended to capital materials used in solar cell manufacturing and connectors.

These exemptions will reduce the cost of renewable energy projects, encouraging investment in clean energy and supporting India’s transition to a sustainable energy future. By making renewable energy more affordable, the government aims to reduce carbon emissions and enhance energy security.

7. Mudra Loan Limit Raised

The Pradhan Mantri Mudra Yojana loan amount has been doubled from ₹10 lakh to ₹20 lakh. This increase is aimed at providing collateral-free loans to Micro, Small, and Medium Enterprises (MSMEs), with a special assistance fund also announced.

Enhanced access to credit will empower MSMEs, enabling them to expand operations, innovate, and contribute to economic growth. The establishment of special CDB branches in MSME clusters and the opening of 24 new branches this year will further support these enterprises.

8. Agricultural Sector

The budget allocates ₹1.52 lakh crore to the agriculture sector. Additionally, 10,000 biological research centers will be established to promote innovation and sustainable farming practices. New Kisan Credit Cards will be introduced in five states.

Increased funding and innovative initiatives in the agriculture sector will enhance productivity, ensure food security, and improve the livelihoods of farmers. The establishment of research centers will drive sustainable practices, while the introduction of Kisan Credit Cards will facilitate easier access to credit for farmers.

9. E-Commerce Financing

The budget announces the establishment of food irradiation e-commerce export hubs in PPP mode and financial assistance to 50 multi-product food irradiation units. This initiative aims to enhance MSMEs’ access to international markets and ensure food safety standards.

This support for e-commerce and food irradiation will boost exports, ensure higher food safety standards, and provide a competitive edge to MSMEs in the global market. The PPP model will encourage private sector participation, fostering innovation and efficiency.

10. TCS for Luxury Goods

To curb tax evasion in the luxury segment and generate additional revenue, the government has imposed a 1% Tax Collected at Source (TCS) on notified luxury goods worth more than ₹10 lakh.

The TCS on luxury goods will enhance compliance and reduce tax evasion in the high-end market. While it may slightly increase the cost of luxury items, the impact on overall demand is expected to be minimal. The additional revenue generated will support public expenditure and development projects.

Conclusion

The Union Budget 2024 presents a comprehensive plan aimed at fostering economic growth, ensuring stability, and promoting equitable development. From tax reforms to increased capital expenditure, the budget addresses various facets of the economy, supporting individuals, businesses, and key sectors.