Union Budget 2024: Key Highlights and Analysis

# Union Budget 2024: Key Highlights and Analysis

By: Avinash Kumar
Linkedin: https://www.linkedin.com/in/kindledavinash/

The #UnionBudget24 speech by Finance Minister Nirmala Sitharaman has introduced a range of initiatives targeting employment, education, infrastructure, and tax reforms. Here’s a comprehensive breakdown of the significant announcements and their potential impact.

In terms of employment initiatives, the budget has introduced several schemes via EPFO. First-time employees are set to benefit from receiving one month’s wage, up to ₹15,000, in three installments. The manufacturing sector will see benefits for employees and employers with EPFO contributions covered for four years. Employers will also receive compensation of ₹3,000 for each additional employment. These measures are aimed at encouraging job creation and easing the financial burden on employers, thereby fostering a more robust employment market.

For education and student support, the budget has laid out significant financial aid plans. Students can avail loans up to ₹10 lakh for higher education in Indian institutes, with E-vouchers provided against a 3% interest subsidy. This initiative is designed to make higher education more accessible and affordable, potentially increasing the number of skilled graduates entering the workforce.

The budget has also made substantial allocations for infrastructure and regional development, particularly in the Northeast, Bihar, and Andhra Pradesh. This includes numerous schemes for roads, bridges, and institutions, which are expected to enhance connectivity and support regional economic growth. The focus on these states indicates a targeted approach to balancing development across different regions.

Support for MSMEs has been strengthened with an increase in the Mudra Loan limit from ₹10 lakhs to ₹20 lakhs for MSMEs in the Tarun category, provided they have fully repaid their existing loans. This move is likely to boost small and medium enterprises, helping them expand their operations and contribute more significantly to the economy.

An ambitious internship scheme has been announced, aimed at providing opportunities in the top 500 companies for 1 crore youth over the next five years. The scheme includes a monthly allowance of ₹5,000 and a one-time benefit of ₹6,000 provided by the government. This initiative is set to enhance the skills and employability of young people, addressing the gap between education and employment.

In the housing and real estate sector, the PM Awas Yojana 2.0 will offer a central subsidy for 1 crore houses over the next five years, with an interest subsidy. Additionally, the Center will request states to reduce stamp duty, especially for women owners. These measures are expected to make housing more affordable and promote homeownership, particularly among women.

Renewable energy initiatives include the PM Suryaghar Muft Bijli Yojna, which has already received 14 lakh applications. This reflects the government’s commitment to promoting clean energy and reducing the carbon footprint.

A significant allocation of ₹11 lakh crore (3.4% of GDP) has been made for capital infrastructure expenditure. This substantial investment is expected to drive economic growth by creating jobs and improving infrastructure across the country.

The digitization of land records through the Bhoo-Aadhar for rural lands and urban land records is another notable initiative. This could be a game changer, enhancing transparency and reducing disputes related to land ownership.

In terms of retirement and savings, the NPS Vatsalya scheme allows parents to contribute to minors’ accounts, which will convert to a regular NPS account at age 18. This initiative encourages long-term savings and financial planning from an early age.

The fiscal deficit target has been set at 4.9% for FY25, indicating the government’s commitment to fiscal discipline while continuing to invest in key areas of the economy.

Direct taxes updates reveal that 66% of individual taxpayers filed under the new tax regime last year. A comprehensive review of the Income Tax Act is underway to simplify it, making compliance easier for taxpayers. Simplification of capital gains tax includes short-term gains taxed at 20% or at the slab rate, and an increase in the long-term capital gain exemption limit to ₹1.25 lakh from the existing ₹1 lakh. These changes aim to simplify the tax regime and make it more attractive for investors.

For startups, the removal of the Angel Tax is a significant relief, encouraging investment in new ventures and fostering innovation. The Securities Transaction Tax on Futures & Options will see an increase, impacting traders in these instruments.

The new tax regime has been enhanced with an increase in the standard deduction to ₹75k from ₹50k. The tax slab revisions for FY24-25 include 0-3 lakh: Nil, 3-7 lakh: 5%, 7-10 lakh: 10%, 10-12 lakh: 15%, 12-15 lakh: 20%, and 15 lakh+: 30%. This results in additional tax savings of ₹17,500 compared to the previous year, providing relief to salaried employees.

For retail investors, the budget highlights include short-term gains on equity taxed at 20% (previously 15%), long-term gains on all equity taxed at 12.5% (previously 10%), and an increase in the capital gains exemption limit to ₹1.25 lakh per year. The abolition of the Angel Tax, increased standard deduction, and reduced gold & silver import duty to 6% (from 15%) are significant benefits. Additionally, the indexation benefit has been removed from real estate, with long-term taxation set at 12.5% and a holding period of two years. Funds of Funds (FoF), Gold Funds, ETFs, and International Funds will be taxed after two years at 12.5%, although some details remain unclear.

On first glance, this budget appears to be beneficial for salaried employees, job seekers, and retail investors alike. The focus on employment, education, and infrastructure development, coupled with tax reforms, indicates a balanced approach to growth and fiscal responsibility. Overall, the Union Budget 2024 presents a strategic plan aimed at stimulating economic growth, enhancing employment opportunities, and simplifying the tax regime, thereby creating a more robust and inclusive economy.

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