Ownership, leasing and flagging reforms will be implemented for the shipping industry to improve the share of Indian shipping and generate more employment, said the Union Minister of Finance and Corporate Affairs, Mrs Nirmala Sitharaman, while presenting the Union Budget 2024-25 in Parliament on Tuesday.
Infrastructure focus
Besides, she underlined that the significant investment the Central government has made over the years in building and improving infrastructure has had a strong multiplier effect on the economy. Government will endeavour to maintain strong fiscal support for infrastructure over the next 5 years, in conjunction with imperatives of other priorities and fiscal consolidation. `11,11,111 crore for capital expenditure has been allocated this year, which is 3.4 per cent of our GDP.
She highlighted that despite the global economy remaining under the grip of policy uncertainties, India’s economic growth continues to be the shining exception and will remain so in the years ahead. She added said that India’s inflation continues to be low, stable and moving towards the 4 per cent target. Core inflation (non-food, non-fuel) currently is 3.1 per cent and steps are being taken to ensure supplies of perishable goods reach market adequately.
Dwelling on the Budget theme, Mrs Sitharaman said, turning attention to the full year and beyond, in this Budget, the government is particularly focusing on employment, skilling, MSMEs, and the middle class. She announced the Prime Minister’s package of 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. This year, `1.48 lakh crore has been allocated for education, employment and skilling.
Nine Budget priorities
The Finance Minister said, for pursuit of ‘Viksit Bharat’, the Budget envisages sustained efforts on the following 9 priorities for generating ample opportunities for all:
* Productivity and resilience in Agriculture
* Employment & Skilling
* Inclusive Human Resource Development and Social Justice
* Manufacturing & Services
* Urban Development
* Energy Security
* Infrastructure
* Innovation, Research & Development
* Next Generation Reforms
Support for promotion of MSMEs
Mrs Sitharaman said that the Budget provides special attention to MSMEs and manufacturing, particularly labour-intensive manufacturing. A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to `100 crore, while the loan amount may be larger. Similarly, public sector banks will build their in-house capability to assess MSMEs for credit, instead of relying on external assessment. She also announced a new mechanism for facilitating continuation of bank credit to MSMEs during their stress period.
Also facilitated was setting up e-commerce export hubs under PPP mode, to enable MSMEs and traditional artisans to sell their products in international markets and promote trade and export related services under one roof.
Tax system review
Apart from giving relief to four crore salaried individuals and pensioners of the country in the direct taxes, Union Budget 2024-25 seeks to comprehensively review the direct and indirect taxes in the next six months, simplifying them, reducing tax incidence and compliance burdens and broadening the tax nets. The Budget proposes comprehensive rationalisation of GST tax structure along with review of the Customs Duty rate structure to improve the tax base and support domestic manufacturing. A comprehensive review of the Income Tax Act is targeted at reducing disputes and litigations and to make the act lucid, concise and easy to read. The Minister said that simplification of tax regimes without exemptions and deductions for corporate and personal income tax has been appreciated by tax payers as over 58 per cent of corporate tax came from simplified tax regime in 2022-23 and more than two-third tax payers have switched over to the new personal income tax regime.
Budget 2024-25 has increased standard deduction of salaried employees from ` 50,000/- to ` 75,000/- for those opting for the new tax regime.
Boosting investment and employment
To promote investment and foster employment, Budget has given boost to entrepreneurial spirit and start-up ecosystem, abolishing angel tax for all classes of investors. Further, a simpler tax regime for foreign shipping companies operating domestic cruises is proposed looking at the tremendous potential of cruise tourism. Foreign mining companies selling raw diamonds in the country can now benefit from safe harbour rates which will benefit the diamond industry. Further, corporate tax rate on foreign companies reduced from 40 to 35 per cent to attract foreign capital.
Budget has further simplified the direct tax regime for charities, TDS rate structure and capital gains taxation. The two tax exemption regimes for charities will be merged into one. 5 per cent TDS on many payments to be merged into 2 per cent TDS, and 20 per cent TDS on repurchase of units by mutual funds or UTI stands withdrawn. TDS rate on e-commerce operators reduced from 1 per cent to 0.1 per cent. Now credit of TCS will be given on TDS deducted from salary. Budget has decriminalised delay of payment of TDS up to the due date of filing of TDS statement. Standard Operating Procedure to be brought out soon for simplified and rationalised compounding guidelines for TDS defaults.
On Capital Gains, short term gains shall henceforth attract a rate of 20 per cent on certain financial assets. Long term gains on all financial and non-financial assets to attract 12.5 per cent rate. Limit of exemption of capital gains has been increased to `1.25 lakh per year to benefit lower and middle-income classes. Listed financial assets held for more than a year and unlisted assets (financial and non-financial) held for more than two years to be classified as long term assets. Unlisted bonds and debentures, debt mutual funds and market linked debentures will continue to attract applicable capital gains tax.
Acknowledging that GST has decreased tax incidence on common man and terming it as a success of vast proportions, Mrs Nirmala Sitharaman said that GST has reduced compliance burden and logistics cost for trade and industry. Now the government envisages further simplifying and rationalising the tax structure to expand it to remaining sectors. The Budget also proposed to further digitalise and make paperless the remaining services of Customs and Income Tax including rectification and order giving effect to appellate orders over the next two years.
Customs duty rationalisation
Custom duties have been revised to rationalise and revise them for ease of trade and reduction of disputes. Giving relief to cancer patients, the Budget has fully exempted three more cancer treating medicines from Custom duties, namely, Trastuzumab Deruxtecan, Osimertinib and Durvalumab. There will be reduction in Basic Customs Duty (BCD) on X-ray machines tubes and flat panel detectors. BCD on mobile phones, Printed Circuit Board Assembly (PCBA) and mobile chargers reduced to 15 per cent. To give a fillip to processing and refining of critical minerals, Budget has fully exempted Custom duties on 25 rare earth minerals like lithium and reduced BCD on two of them. Budget has proposed to exempt capital goods for manufacturing of solar panels.
To boost India’s seafood exports, BCD on broodstock, polychaete worms, shrimps and fish feed reduced to 5 per cent. Budget will foster competitiveness of Indian leather and textiles articles of export. BCD reduced from 7.5 per cent to 5 per cent in Methylene Diphenyl Diisocyanate (MDI) used for manufacture of spandex yarn. Custom duties on gold and silver reduced to 6 per cent and on platinum to 6.4 per cent. BCD on ferro nickel and blister copper removed, while, BCD on ammonium nitrate increased from 7.5 to 10 per cent to support existing and new capacities in pipeline. Similarly, BCD on PVC flex banners increased from 10 to 25 per cent considering the hazard to environment. To incentivise domestic manufacturing, BCD on PCBA of specific telecom equipment increased from 10 to 15 per cent.
For dispute resolution and dispose-off backlogs, Union Finance Minister has proposed ‘Vivaad se Vishwas Scheme, 2024’ for resolution of certain income tax disputes pending in appeal. The monetary limits for filing appeals related to direct taxes, excise and service tax in High Courts, Supreme Courts and tribunals has been increased to ` 60 lakh, ` 2 crore and ` 5 crore, respectively. Further, to reduce litigation and provide certainty in international taxation, scope of safe harbour rules to be expanded and transfer pricing assessment procedure to be streamlined.