Budget 2024 Key Highlights: LTCG Tax Raised, Revised Tax Structure

Introduction

Overview of Budget 2024

Finance Minister Nirmala Sitharaman presented the Union Budget 2024-25 in the Lok Sabha, marking the first budget of Prime Minister Narendra Modi’s third term in office. This budget focuses on nine priorities for generating ample opportunities across various sectors.

Relevance and Importance

The Union Budget 2024-25 is crucial as it sets the tone for India’s economic strategy for the upcoming fiscal year, impacting individuals, businesses, and the overall economy. With significant changes in tax structures and increased capital gains tax, the budget aims to balance fiscal discipline with growth incentives.

Revised Tax Structure in New Regime

Changes in Income Tax Slabs

Finance Minister Sitharaman announced a revised income tax structure in the new regime, aiming to provide relief and stimulate economic activity.

• ₹0-3 lakh: Nil
• ₹3-7 lakh: 5%
• ₹7-10 lakh: 10%
• ₹10-12 lakh: 15%
• ₹15 lakh and above: 30%

Impact on Taxpayers

The revised tax slabs will result in a ₹17,500 saving in income tax for taxpayers. This restructuring aims to simplify the tax regime and make it more equitable.

Capital Gains Tax Adjustments

Announcements on Capital Gain Taxes

The budget includes significant changes to capital gains taxes to increase revenue and encourage long-term investments:

• 20% is now the short-term capital gains tax on some financial assets.
• Long-term capital gain tax revised to 12.5% on financial assets
• TDS rate on e-commerce operators cut to 0.1% from 1%

Implications for Investors

These adjustments will impact investment strategies, particularly for those heavily invested in financial assets. The increased long-term capital gains tax is intended to boost government revenues while maintaining investment incentives.

Custom Duties Revisions

Key Changes in Custom Duties

The budget announces several cuts in custom duties to promote domestic manufacturing and reduce import costs:

• Customs duties on gold and silver cut to 6%, platinum to 6.4%
• Lithium, copper, cobalt exempted from custom duty
• Enlarged list of capital products that are exempt from tax and are used to make solar panels and cells
• Reduced BCD on MDI for manufacturing spandex yarn from 7.5% to 5%
• Exempt customs duty on manufacturing connectors and oxygen-fused copper

Impact on Industries

These changes aim to make raw materials more affordable for manufacturers, boosting the competitiveness of Indian industries in the global market.

Fiscal Deficit and Economic Projections

Fiscal Deficit Targets

The budget projects the FY25 fiscal deficit at 4.9% of GDP, down from 5.1% in the Interim Budget. The government aims to reduce the deficit below 4.5% in the next fiscal year.

Expenditure and Receipts

• FY25 expenditure: ₹48.21 lakh crore
• FY25 receipts: ₹32.07 lakh crore

Long-Term Fiscal Strategy

The government’s commitment to fiscal discipline is evident in its plans to gradually reduce the fiscal deficit while ensuring sustainable economic growth.

Infrastructure Development Initiatives

Development of Industrial Parks

The budget includes ambitious plans to develop industrial parks in or near 100 cities, promoting regional industrial growth and job creation.

• Investment-ready “plug and play” industrial parks
• 12 industrial parks sanctioned under the National Industrial Corridor Development Programme
• Critical Mineral Mission to support domestic production, recycling, and overseas acquisition of critical mineral assets

Implications for Urban Development

These initiatives will drive urbanization and industrialization, providing significant opportunities for businesses and job seekers in these regions.

Skilling and Employment Boost

Skilling Programme and ITI Upgradation

The budget allocates resources for a comprehensive skilling program and the upgradation of Industrial Training Institutes (ITIs):

• 1,000 ITIs to be upgraded in hub and spoke arrangements over five years
• Prioritize results and quality while working with states and businesses.

Internship Opportunities

• 1 crore youth to be skilled by top companies in five years
• 12-month Prime Minister’s Internship with a monthly allowance of ₹5,000

Enhancing Workforce Competitiveness

These measures aim to enhance the skill set of the Indian workforce, making it more competitive in the global market.

Capital Expenditure Plans

FY25 Capex Allocation

The Finance Minister announced that the capital expenditure for FY25 will remain at ₹11.11 lakh crore, equivalent to 3.4% of GDP, as in the Interim Budget.

Focus Areas

The capital expenditure will focus on infrastructure development, including roads, railways, and urban infrastructure, to stimulate economic growth and create jobs.

Support for MSMEs

New Mechanisms for MSME Support

The budget introduces several measures to support Micro, Small, and Medium Enterprises (MSMEs):

• New mechanism for facilitating continuation of bank credit to MSMEs during stress periods
• Limit of Mudra loans increased from ₹10 lakh to ₹20 lakh
• Turnover threshold for mandatory onboarding on TReDS platform reduced from ₹500 crore to ₹250 crore
• Financial support for 50 multi-product food irradiation units in MSME sector
• E-Commerce Export Hubs to be set up in PPP mode to enable MSMEs and traditional artisans to sell their products internationally

Boosting MSME Growth

These initiatives aim to enhance the resilience and growth of MSMEs, which are crucial for the Indian economy.

Conclusion

Summary of Key Points

The Union Budget 2024-25 presents a balanced approach to fiscal discipline and economic growth. Key highlights include the revised tax structure, increased capital gains tax, custom duty cuts, and significant allocations for infrastructure and skill development.

Call to Action

For more detailed updates and analysis on Budget 2024, stay tuned to our live coverage. Engage with industry experts, explore the implications for various sectors, and stay informed about the latest developments.

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