Updated on: Feb 8th, 2024
27 min read
Budget Day is an eagerly anticipated event in India, with both businesses and the general public waiting with baited breath to understand the schemes and initiatives that could potentially benefit them. This year, in light of the upcoming elections, Budget 2024 has been substituted with an Interim Budget. Nevertheless, the honourable Finance Minister, Smt. Nirmala Sitharaman, has not failed to deliver on schemes and benefits, much to the satisfaction of the general public.
The FM announced on 1st February 2024 that the theme for this year’s Budget would be “Viksit Bharat Budget 2024”. She reiterated that the country continues to strive towards Atmanirbhar Bharat. At the same time, the welfare and aspirations of the Gareeb (poor), Mahila (women), Yuva (youth), and Annadata (farmers) would be the most important focus areas in the Interim Budget 2024.
Here are the key highlights from the Interim Budget 2024.
This year’s Budget took on the Viksit Bharat theme, with the government visualising a developed India by 2047. ‘Garib’ (Poor), ‘Mahilayen’ (Women), ‘Yuva’ (Youth) and ‘Annadata’ (Farmers) are the four-pillars of the Viksit Bharat Budget 2024. In light of the people-centric inclusive development plan, the Finance Minister announced-
The Finance Minister highlighted the need for sustainable development by committing to meet ‘Net Zero’ by 2070 under Amrit Kaal. In this regard, the FM proposed:
The FM highlighted the need for inclusive development under Amrit Kaal, with an aspirational District Programme to assist states in faster development, including employment generation. In this regard,
Further, five integrated aquaparks will be set up.
The following allocations have been proposed for various ministries under the Interim Budget 2024:
INR (in lakh crore)
Ministry of Defence
Ministry of Road Transport and Highways
Ministry of Railways
Ministry of Consumer Affairs, Food & Public Distribution
Ministry of Home Affairs
Ministry of Rural Development
Ministry of Chemicals and Fertilisers
Ministry of Communications
Ministry of Agriculture and Farmers’ Welfare
On the other hand, the following allocations have been proposed for major schemes in force under the Interim Budget 2024:
Firstly, let's understand the difference between Interim Budget vs. Full Budget. Unlike a full-fledged budget covering the entire fiscal year, an interim budget bridges the gap until a new government is formed. Think of it as a temporary financial plan focused on routine expenses and ongoing programs. This explains why major policy changes or tax reforms are usually off the table.
The Election Commission of India's code of conduct restricts the ruling party from making populist announcements or introducing significant policy shifts during an election year. So, while the interim budget will present a complete picture of India's finances, don't expect fireworks.
A crucial aspect of the interim budget is the "Vote on Account." This essentially authorizes the government to withdraw funds from the treasury for essential expenses like salaries, debt servicing, and ongoing programs. It ensures the administration can function smoothly until the new government takes charge.
Finance Minister Nirmala Sitharaman herself has downplayed expectations, stating the February budget will be a bare-bones affair to keep the wheels turning until the elections. This means focusing on essential expenditure with minimal policy tinkering. However, we expect the following from the Budget 2024:
Relaxation in ESOP taxation: Startups have been rewarding employees with ESOPs to nudge them to join startups. It is expected that a lot of startups will go public this year. Accordingly, it would help startups if government makes ESOP taxation rules employee friendly. Further, this move help generate more employment in startups.
Increase in limit of home loan interest: As of now, the maximum deduction for interest repayment on a loan taken to acquire a property(self-occupied) is Rs 2,00,000. This, however, limits the prospective buyer’s ability to acquire a property. In most cities, the price of property has gone up significantly, and consequently, interest payments on home loans have also increased. So, the limit of Rs 2,00,000 needs to be looked upon.
Allowing home loan interest under the new tax regime: Under the new tax regime, the interest paid on a home loan on rented-out property is allowed; however, the same is not allowed for the self-occupied property. To encourage home buyers, the inclusion of home loan interest repayment in the new tax regime is expected. Further, it may improve the acceptability of the new tax regime.
Increase the limit of 80D deduction: Increase the limit of Sec 80D from 25,000 to 50,000 for normal persons and 50,000 to 75,000 for senior citizens as the premium amount periodically increases.
Inclusion of 80D in the new tax regime: Since medical insurance is the need of the hour, allowing medical insurance premiums paid as a deduction under the new tax regime shall increase the coverage and improve the acceptability of the new tax regime.
Bengaluru’s listing as a metro city for HRA Exemption: Despite Bengaluru’s recognition as a metro city constitutionally, its classification as a non-metro for income tax purposes restricts HRA deductions to 40%, unlike other metro cities. There is a demand to increase it to 50%.
On the Indirect tax front:
Option to revise GST returns: Errors in filed returns can only be rectified in subsequent return periods. We expect a revision of returns to be allowed; that’ll be a win-win for taxpayers and the department, as this will help reduce the number of notices and intimations manifold. GSTN is working towards this, and we can know its dynamics once the government releases APIs.
e-Invoicing for B2C transactions: Extending this requirement to B2C transactions would further reduce tax evasion and ensure better compliance. However, this would also mean increased compliance burdens for businesses, especially smaller ones, which may require technological upgrades to adhere to these requirements.
While the 2024 interim budget might not be a game-changer, it provides valuable insights into the country's financial health and future priorities. For businesses and individuals, understanding the budget's focus and direction can help in strategic planning and decision-making.
Remember, the interim budget is not the final act. The full-fledged budget for FY 2024-25 will be presented after the elections, reflecting the new government's vision and plans. So, stay tuned for the next chapter in India's economic saga!
Other Key Points:
In Budget 2024, the FM announced that the theme for this year’s Budget would be ‘Viksit Bharat Budget 2024’, which envisions a developed India by 2047. The four pillars of Viksit Bharat will include the ‘Garib’ (Poor), ‘Mahilayen’ (Women), ‘Yuva’ (Youth) and ‘Annadata’ (Farmers).
Further, the FM highlighted the shift from Amrit Kaal to Kartavya Kaal, focussing on sustainable development, infrastructure and investment, inclusive development, and agriculture and food processing.
The FM also announced that the same tax rates will be retained in FY 2024-25 for direct taxes. There will be no tax liability for taxpayers with an income of up to Rs.7 lakh, under the new tax regime. The 22% tax rate for corporate taxes will apply for existing domestic companies and 15% for certain new manufacturing companies.
You can read the highlights of Interim Budget 2024 here.
The FM announced in the Interim Budget 2024 that the same tax rates will be retained in FY 2024-25 for direct taxes. There will be no tax liability for taxpayers with an income of up to Rs.7 lakh, under the new tax regime.
No, there is no change in the tax slabs as announced by the FM in the Interim Budget 2024.
In the case of an election year, the current government presents the Budget in the form of an Interim Budget or a ‘Vote on Account’. This year, Budget 2024 was presented in the form of an Interim Budget on 1st February 2024. An Interim Budget bridges the gap until the new government is formed, and typically, there are no major announcements or reforms presented. The Budget announces the present state of the economy, tax collections, and proposed expenditures.
On the other hand, a ‘Vote of Account’ refers to when the outgoing government requests approval from the Parliament to access funds from the Consolidated Funds of India for government expenditures and programmes until the new government is formed.
Voting on Account refers to when the outgoing government requests approval from the Parliament to access funds from the Consolidated Funds of India for government expenditures and programmes until the new government is formed. A Vote on Account is defined in Article 116 of the Indian Constitution.
The Appropriation Bill gives the current government the power to withdraw funds from the Consolidated Fund of India for expenditure during the financial year. It is defined in Article 114 of the Indian Constitution.
Typically, the Appropriation Bill is introduced in the Lok Sabha after discussing the Budget proposals announced by the current government. However, since the government cannot withdraw funds from the Consolidated Funds of India until the Appropriation Bill is enacted, the Constitution has authorised the Lok Sabha to make a grant in advance for a part of the financial year to meet the immediate expenditure of the government. This provision is known as the ‘Vote on Account’.
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