FISCAL STRATEGIES COMPARED: INSIGHTS FROM THE 2023 AND 2024 BUDGETS
National budgets are not just financial documents; they are reflections of a government’s priorities, strategies, and responses to current and future challenges. The budget reflects the government’s economic policies, addressing current economic challenges and setting the course for future development. It includes proposals for tax policies, public spending, and fiscal deficit targets, and is a key tool for implementing social and economic reforms. The presentation of the budget is a significant event in India’s political and economic calendar, shaping the country’s economic landscape and impacting citizens’ lives. The budgets of 2023 and 2024 are particularly noteworthy, given the evolving global economic landscape and domestic considerations.
OVERVIEW OF THE 2023-24 BUDGET
The 2023 budget was distinguished by an emphasis on economic restoration after the disturbances resulting from the epidemic. It placed a focus on digitization, healthcare advancements, and infrastructural development. Seven priorities of the budget are inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power, and the financial sector.
OVERVIEW OF THE 2024-25 BUDGET
The 2024 budget focuses on increased support for the poor, women, youth, and farmers, with boosted spending and job creation. The budget outlines increased spending, job creation initiatives, and tax relief for the middle class. To create plenty of opportunities for all in the pursuit of ‘Viksit Bharat’, this budget calls for consistent efforts across nine major priorities. The key priorities include Productivity and Resilience in Agriculture, Employment & Skilling, Inclusive Human Resource Development and Social Justice, Manufacturing & Services, Urban Development, Energy Security, Infrastructure, Innovation, Research & Development, and Next Generation Reforms.
DIRECT TAX
The tax regime in the union budget for FY 2024-25 raised the standard deduction limit under the new tax regime to Rs.75,000 from the earlier limit of Rs.50,000. Family pension deduction has been increased to Rs. 25,000 from Rs. 15,000. Salaried employees will benefit from Rs. 17,500 by the new regime. The tax slab for FY 2023-24 contains no tax rate for income up to Rs.3 lakh, 5% for Rs.3 lakhs to Rs.6 lakhs, 10% for Rs.6 lakh to Rs.9 lakhs, 15% for Rs.9 lakhs to Rs.12 Lakhs, 20% for Rs.12 lakhs to Rs.15 lakhs and 30% for more than Rs.15 lakhs. Whereas the tax slab for FY 2024-25, contains no tax rate for income up to Rs.3 lakh, 5% for Rs.3 lakhs to Rs.7 lakhs, 10% for Rs.7 lakh to Rs.10 lakhs, 15% for Rs.10 lakhs to Rs.12 Lakhs, 20% for Rs.12 lakhs to Rs.15 lakhs and 30% for more than Rs.15 lakhs.
In the budget for FY 2023-24, there was no provision for tax deduction at the source (TDS) on payment of salary, remuneration, interest, bonus, or commission to partners by the partnership firm but under the new budget for FY 2024-25, 10% TDS is deducted on payment of aggregate amounts of more than Rs 20,000 in the FY of the partnership firm’s salary, remuneration, interest, bonus, or commission to partners. The tax rate on long-term capital gains for all financial and non-financial assets will rise from 10% in the budget for FY 2023-24 to 12.5% in the budget for FY 2024-25.
INDIRECT TAXES AND CUSTOM DUTY
The 2024 budget introduced several changes to India’s customs duty structure compared to the 2023 budget. The import duty on gold and silver is down to 6% now, compared to 15% earlier. Platinum import duty is down to 6.4% from 15.4% earlier. Customs duty cut on ferronickel and blister copper; whereas duty hiked to 15% from 10% on specified telecom equipment. Custom duty on shrimp feeds and broodstock has been reduced from 15% to 5%. Three more cancer medicines are to be exempted from customs duty. Reduction in customs duty rates on X-ray tubes, mobile phones and related parts. The customs duty on 25 critical minerals to be fully exempted. The list of capital goods used for solar panels has been extended for GST exemption. Custom duty is to be increased on Ammonium Nitrate from 7.5% to earlier 10%. Mythelene, dye, and yarn duty is reduced from 7.5% to 5%.
INFRASTRUCTURE & INVESTMENT
The 2023 budget placed a strong emphasis on infrastructure development, with a 33% increase in capital investment, bringing the total to ₹10 lakh crore, which constitutes 3.3% of GDP. It included provisions to support state governments for capital investments with an allocation of ₹1.3 lakh crore. Additionally, a new Infrastructure Finance Secretariat was proposed to help attract more private investment in infrastructure. The plan also included the revival of 50 airports, heliports, aerodromes, and advanced landing grounds to enhance regional air connectivity. States were encouraged to develop “sustainable cities of tomorrow,” and an Urban Infrastructure Development Fund (UIDF) was proposed, to be managed by the National Housing Bank, utilizing the shortfall in priority sector lending.
The Central Government has announced significant investments in infrastructure in the budget for FY 2024-25 that have had a strong multiplier effect on the economy. For capital investment, Rs.11,11,111 crore has been allocated which constitutes 3.40% of GDP. There is a provision of `Rs.1.5 lakh crore for long-term interest-free loans to support states in infrastructure investment. It provides for the launch of phase IV of Pradhan Mantri Gram Sadak Yojana (PMGSY) to provide all-weather connectivity to 25,000 rural habitations. It also provides for Assistance for the development of temples, monuments, craftsmanship, wildlife sanctuaries, natural landscapes, and pristine beaches of Odisha to support tourism.
SUMMARY
The comparative analysis of the 2023 and 2024 budgets highlights the Indian government’s evolving economic strategies and priorities. Both budgets demonstrate a strong commitment to infrastructure development, with significant capital investments aimed at fostering economic growth and improving public services. The shift towards sustainable and green infrastructure in 2024 underscores a forward-looking approach, aligning with global trends in environmental responsibility and technological advancement.
Tax policies in the 2024 budget reflect a focus on providing relief to the middle class while also adjusting rates to support economic stability and encourage investment. The adjustments in customs duties aim to protect domestic industries, enhance competitiveness, and promote exports, particularly in emerging sectors like renewable energy and technology.
Overall, the budgets indicate a strategic alignment towards inclusive development, economic resilience, and modernization. These financial plans set the stage for India’s continued growth and transformation into a more sustainable, technologically advanced, and inclusive economy, addressing both current needs and future challenges.
HOW WE CAN HELP?
- Our team can help businesses understand the new tax regulations and compliance requirements introduced in the budget.
- We can offer financial advisory services to assess the impact on cash flow, profitability, and overall financial planning with regards to changes in customs duties, excise taxes, and corporate tax rates.
- Our team can support companies in planning and executing projects that align with government priorities, such as renewable energy, digital infrastructure, and sustainable practices.
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