Union Budget 2024-25

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Basics about Union Budget

• The Union Budget is an annual financial statement presented by the Government of India to Parliament, outlining projected income and expenses for the upcoming financial year.
• According to Article 112 of the Indian Constitution, the annual financial statement is a statement of the estimated receipts and expenditures of the government for a particular year.
• The receipts and expenditures are shown under three parts, namely, the Consolidated Fund of India and the Public Account of India (Article 266), and the Contingency Fund of India (Article 267).
• It is prepared by the Department of Economic Affairs, Ministry of Finance, for the fiscal year that runs from 1st April to 31st March.

• The Union Budget addresses key areas, including Taxation, Government spending and allocations, Economic growth and development, Social welfare and subsidies.

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Focus Areas, Themes, etc

Key Focus Areas:

• Job Creation: The budget prioritizes creating jobs through employment incentives, skilling programs, and apprenticeships. It aims to provide opportunities for 10 million youth in top-tier companies through a national apprenticeship program and internships.

• Support for Small Businesses: The budget introduces a collateral-free loan scheme and government credit guarantees to support small businesses. It also facilitates their access to export markets through e-commerce linkages, recognizing their significant role in value addition, exports, and employment.

• Fiscal Responsibility: The budget demonstrates fiscal restraint by making conservative revenue assumptions. It uses half of the fiscal surplus from the Reserve Bank of India to reduce the deficit, emphasizing fiscal consolidation.

• Taxation: The budget increases the tax on capital gains and proposes widening the direct tax net. It also raises the top tax tier for incomes above ₹1 crore and reduces the import duty on gold from 15% to 6% to prevent duty leakage and smuggling.

• Human Capital Investment: The budget stresses the need for massive investment in human capital. It emphasizes the need for public funds for primary and secondary education, while higher education and skilling should be funded through student loans.

• Innovation and Infrastructure: The budget promotes public-private partnerships for small modular nuclear reactors and the space economy. It also addresses India’s transition away from fossil fuels, aiming for sustainable growth.

Target Groups:

• Garib (Poor): The budget focuses on initiatives to support the poor, including job creation and skill development programs.

• Mahilayen (Women): The budget aims to empower women through various initiatives, including education and employment opportunities.

• Yuva (Youth): The budget prioritizes the youth, with a focus on employment, skilling, and education initiatives.

• Annadata (Farmer): The budget aims to support farmers through various initiatives, including credit guarantees and market access.

Theme:

• The budget focuses on employment, skilling, MSMEs, and the middle class, with an emphasis on initiatives to support the 4 target groups.

• The Prime Minister’s package includes 5 schemes and initiatives to facilitate employment, skilling, and other opportunities for 4.1 crore youth over a 5-year period, with a central outlay of ₹2 lakh crore.

• An allocation of ₹1.48 lakh crore has been made for education, employment, and skilling initiatives this year.

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9 Priorities in Pursuit of Viksit Bharat

Priority 1: Productivity and Resilience in Agriculture

• The government will release 109 new high-yielding and climate-resilient crop varieties.
• Additionally, 10 million farmers will adopt natural farming practices, supported by certification and branding.
• There will also be an establishment of 10,000 bio-input resource centers to support sustainable agriculture.
• The government aims to achieve self-sufficiency in pulses and oilseeds, including mustard, groundnut, sesame, soybean, and sunflower.
• A provision of ₹1.52 lakh crore has been allocated for agriculture and allied sectors.
• Other initiatives include issuing Kisan Credit Cards in five states and developing a National Cooperation Policy to boost the rural economy.

Priority 2: Employment & Skilling

• The government will implement three employment-linked incentive schemes to support first-time employees and employers, based on EPFO enrolment.
• Efforts will also be made to increase women’s workforce participation through working women’s hostels and creches.
• A new skilling scheme aims to train 2 million youth over five years and upgrade 1,000 Industrial Training Institutes.
• The Model Skill Loan Scheme will be revised to provide loans up to ₹7.5 lakh, with a government guarantee, benefiting 25,000 students annually.
• Financial support for higher education loans up to ₹10 lakh will be provided, with e-vouchers offering interest subvention for 100,000 students each year.

Priority 3: Inclusive Human Resource Development and Social Justice

• The government will launch the Purvodaya initiative to promote the development of the eastern region, including Bihar, Jharkhand, West Bengal, Odisha, and Andhra Pradesh.
• The Pradhan Mantri Janjatiya Unnat Gram Abhiyan will improve the socio-economic conditions of tribal communities by providing comprehensive coverage in tribal-majority villages and aspirational districts.
• Additionally, over 100 branches of India Post Payment Bank will be set up in the North East region, with a provision of ₹2.66 lakh crore for rural development and ₹3 lakh crore for schemes benefiting women and girls.

Priority 4: Manufacturing & Services

• Support for MSMEs will include a self-financing guarantee fund providing up to ₹100 crore per applicant.
• Public sector banks will enhance their capabilities to assess MSME creditworthiness.
• The limit for Mudra loans will be increased to ₹20 lakh for successful entrepreneurs.
• The government will also provide financial support for 50 multi-product food irradiation units and 100 food quality and safety testing labs.
• A new internship scheme will offer opportunities in 500 top companies to 1 crore youth over five years, with a 12-month internship and a monthly allowance of ₹5,000.

Priority 5: Urban Development

• The PM Awas Yojana Urban 2.0 will address the housing needs of 1 crore urban poor and middle-class families, with a total investment of ₹10 lakh crore, including ₹2.2 lakh crore in central assistance over five years.
• The government will promote water supply, sewage treatment, and solid waste management projects in 100 large cities.
• The PM SVANidhi scheme will support the development of 100 weekly ‘haats’ or street food hubs in select cities over the next five years.

Priority 6: Energy Security

• The PM Surya Ghar Muft Bijli Yojana will install rooftop solar plants to provide 1 crore households with free electricity up to 300 units per month.
• The scheme has already received 1.28 crore registrations and 14 lakh applications.

Priority 7: Infrastructure

• The government will focus on improving infrastructure, which has a strong multiplier effect on the economy.

Priority 8: Innovation, R&D

• The government will operationalize the Anusandhan National Research Fund for basic research and prototype development.
• A financing pool of ₹1 lakh crore will support private sector-driven research and innovation at a commercial scale.
• A ₹1,000 crore venture capital fund will be established to expand the space economy.

Priority 9: Next Generation Reforms

• The government will introduce next-generation reforms to drive economic growth and development, focusing on modernizing regulatory frameworks and promoting innovation and entrepreneurship.

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Highlights for Tax Collection

Indirect Taxes

• GST: The tax structure will be simplified and expanded to cover more sectors, building on the success of GST.
• Customs Duty Changes:
• Medicines and Medical Equipment: Customs duties have been fully exempted on three specific cancer drugs, with adjustments to duties on x-ray tubes and detectors for medical use.
• Precious Metals: Reduced customs duties on gold and silver to 6%, and on platinum to 6.4%.
• Telecommunication Equipment: Increased BCD on PCBA for specified telecom equipment from 10% to 15%.
• Trade Facilitation: Extended the export time for goods imported for repairs and increased the re-import time for warranty repairs.
• Critical Minerals: Full exemption of customs duties on 25 critical minerals.
• Solar Energy: Exemption of customs duties on capital goods for solar cell and panel manufacturing.

Direct Taxes

• Simplification and Services: The government continues efforts to simplify taxes, enhance taxpayer services, and reduce litigation.
• Capital Gains Taxation: Short-term gains on certain financial assets will be taxed at 20%, while long-term gains on all assets will be taxed at 12.5%. The exemption limit for capital gains on certain financial assets has been increased to ₹1.25 lakh per year.
• Litigation and Appeals: Introduction of the ‘Vivad Se Vishwas Scheme, 2024’ for resolving income tax disputes. Increased monetary limits for appeals in Tax Tribunals, High Courts, and the Supreme Court.
• Employment and Investment: Abolition of angel tax for all investors to support the startup ecosystem, and a reduction in the corporate tax rate for foreign companies from 40% to 35%.

Deepening Tax Base and Social Security

• Securities Transactions Tax: Increased tax on futures and options of securities to 0.02% and 0.1%, respectively.
• Social Security Benefits: Increased employer deductions for NPS contributions from 10% to 14% of the employee’s salary, and de-penalized non-reporting of small movable foreign assets up to ₹20 lakh.

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Customs Duty Hike on Laboratory Chemicals Withdrawn

• The Finance Ministry has withdrawn a proposed customs duty hike on imported laboratory chemicals, which was announced in the Budget 2024-25.
• The hike would have increased the cost of essential chemicals for scientific research and experimentation.
• Imported laboratory chemicals are crucial for experimental research across various scientific domains and the medical diagnostics industry.
• However, India lacks local demand to justify the production of niche chemicals, making imports necessary.
• The Budget documents had increased the Basic Customs Duty (BCD) on imported laboratory chemicals from 10% to 150%, leading to a significant price hike.
• However, the Finance Ministry has now clarified that all imported laboratory chemicals, except undenatured ethyl alcohol, will be taxed at the original 10% customs duty rate.
• The government should invest in domestic manufacturing capabilities for niche and specialty chemicals to reduce dependency on imports and lower costs for research institutions.
• Additionally, import regulations for essential laboratory chemicals should be streamlined to ensure clear guidelines and minimal delays.