Union Budget 2024

Government to focus on sustaining medium term growth and restoring fiscal consolidation while prioritizing capex spends.

Join the conversation

#EYOnBudget2024

Twitter LinkedIn

  • Indian economy to show Gross Domestic Product (GDP) growth of 8.2% in FY24, an improvement over 7% seen in FY23.
  • The Government of India's fiscal deficit in FY24 at 5.6% of GDP is lower than the revised estimate of 5.8% on the back of better than anticipated revenues and lower spending on subsidies.
  • The additional fiscal space may be utilized to lower the fiscal deficit to 5% of the GDP while increasing capital expenditure to 3.4% of the GDP.

The Government of India is expected to drive focus on medium term growth and fiscal consolidation in the upcoming 2024-25 Union Budget.

In FY23, the country’s household financial savings fell to a multi-decadal low of 5.3% of GDP, implying that the government had accessed all of this, leaving little for private corporate investment. Driving these savings is critical for the country’s growth. To balance revenue accounts, and free up more capital for private investments, it is desirable for the government to balance revenue accounts towards growth stimulating capital expenditure. 

  1. Size of the economy projected at USD26 trillion (nominal GDP) by 2047 in market exchange terms.
  2. Per capita income in market exchange rate terms is expected to cross USD15,000 by FY2048, putting it in the ranks of developed economies.
  3. 24.3% of the incremental global workforce over the next decade will come from India. Share of working age population to total population peaks at 68.9% by 2030 (1 billion working age persons), overtaking China

Tax certainty, tech-enabled efficiency, and encouraging domestic manufacturing and investments have been the cornerstones of tax policy initiatives in the past year. 

Current priorities for the government include:

  1. Simplify and rationalize the concessional tax regime and assessments for individuals
  2. Maintain income tax rate stability
  3. Tighten enforcement and improve compliance
  4. Minimize disputes
  1. Relaxation from Angel Tax provisions for certain class of persons, such as Foreign Portfolio Investors, among others, who are already subject to stringent regulations
  2. Encourage employment generation through monthly remuneration limit to avail tax deduction that may be enhanced to INR1 lakh from current INR25,000.
  3. Exemption of Buyback distribution tax (BBT) in case of listed shares where buyback is under ‘open market through stock exchange’ method as it results in double taxation in hands of the company (as BBT) and shareholders (as capital gains or business income)
  4. Re-look at Significant Economic Presence (SEP) provisions considering the new Pillar One framework.
  5. Boost manufacturing competitiveness and foster innovation.
  1. Increase in the basic exemption limit from INR3 lakh to INR 5lakh in the new tax regime and reduction in tax rates, in order to provide more disposable income in the hands of taxpayers
  2. Overhaul of the capital gains tax structure – change in tax rates, method of computation, etc.
  3. Enhance the existing limit for deduction towards interest on housing loan for self-occupied house property from INR2 lakh to at least INR3 lakh
  4. Raise the standard deduction threshold from INR50,000 to INR1 lakh
  5. Provide clarity on whether TCS paid by the employees can be considered by the employer at the tax withholding stage
  1. Roadmap for digital transformation of customs tariff framework and compliance to simplify submission of documents like bill of entry and shipping bills.
  2. Simplify litigation resolution and the Amnesty scheme for Goods and Services Tax (GST) disputes- One time dispute/ litigation resolution/ settlement scheme may be introduced under the Customs Law and GST, to settle and resolve the pending disputes.
  3. Procedural rationalization/ clarification of Manufacture and Other Operations in Warehouse Regulations, 2019, required for ease of doing business.
  4. Relax Free Trade Agreement (FTA) concessions to boost SEZ manufacturing and relaxation of bank guarantee requirement for provisional clearance of goods in cases where Certificate of Origin is under verification.
  5. Allowing duty credit scrips for payment of IGST, SWS and compensation CESS and necessary amendment to Foreign Trade Policy and customs notifications easing issues related to blockage of working capital.
  6. Revamp of Special Valuation Branch (SVB) processes, including online submission of SVB questionnaire and issuance of investigation reports within prescribed timelines.
Strategic reforms and enhancements in tax policies and dispute resolution mechanisms are essential for fostering a conducive business environment and to improvise ease of doing business, thereby promoting economic resilience in the country.
Sameer Gupta
EY India Tax Leader

Summary:

Union budget 2024-25 is expected to focus on simplifying tax liabilities for individuals and businesses alike. This is expected to be done with a view to align with the G20 agenda to address tax challenges in a fast-digitizing economy and improve ease of paying taxes, reduce disputes, boost manufacturing and private investments in the economy and improve overall compliance framework.

Contact us

Like what you’ve seen? Get in touch to learn more.