Interim Budget 2024: FM has unveiled the pathway to 'Vikshit Bharat'; here's how

The Finance Minister unveiled the highly anticipated interim budget for the Financial Year (FY) 2024‑25 amidst gazes from India Inc on whether this speech, would have the whole kit and caboodle of the Government's past endeavours and envisaged futuristic measures to earn 'Sabka Vishwas', ahead of elections.

While extensively delving into administration's steadfastness throughout its tenure, the FM underscored the vision for "Viksit Bharat" ie developed India by 2047. One of the highlights of the budget was Government's initiative to allocate a substantial corpus of Rs 1 lakh crores offering 50 year interest free loan to youth of India to facilitate a substantial scale-up of research and innovation in the field of technology. As India fortifies its diplomatic ties on global stage, particularly as a prominent member of G20, FM also articulated a strategic vision to boost Foreign Direct Investment (FDI) into India by advocating the acronym "First Develop India", signalling Government's intent to engage in bilateral treaties with foreign partners.

When it comes to taxation reforms, the budget was underwhelming as was known beforehand. The FM, in her speech explicitly stated that, going by the convention, there would be no change in tax rates, exemptions or deductions for taxpayers, drawing a collective sigh from both individuals and corporates. Nevertheless, reading the fine print of Finance Bill 2024, it could be observed that some of the tax benefits available to start-ups under Section 80-IAC of the Income Tax Act, benefits against investments made by sovereign and pension funds, tax exemptions to certain income of IFSCs, among other provisions which were subject to a setup sunset clause until March 31, 2024, are proposed to be extended to March 31, 2025, as these sectors are acclaimed to compliment Government's efforts towards multipronged economic management. Another crucial initiative taken by FM is withdrawal of outstanding direct tax demands up to Rs 25,000 for FYs up to 2009-10 and demands up to Rs 10,000 for FYs 2010-11 to 2014‑15, to ease burden on taxpayers whilst increasing their confidence on taxation system.

Despite minimal changes made on direct tax front, what stands out is amendment to provisions of Tax Collection at Source. The Bill appears to implement changes made by Circular No 10 of 2023 (Circular) through Finance Act. However, with the provisions around TCS on overseas tour packages shifting gears from Finance Act, 2023 to the Circular and now, to the Bill, taxpayers could witness ambiguities, particularly considering the retrospectivity of amendments proposed in the Bill. The Bill proposes to exempt payments up to Rs 7 lakhs and levy 5 percent TCS on payments exceeding Rs 7 lakh with retrospective effect from July 1, 2023. However, again with effect from October 1, 2023, the Bill has adjusted the rates back to 20 per cent on payments above Rs 7 Lakhs. Ambiguity surrounds transactions between the period July 2023 to October 2023. To sum it up, following table captures TCS rates with effectiveness of the Bill.

The Bill also introduces a significant proposal for partial integration of agricultural income with non-agricultural income under new taxation regime for individuals. This amendment, previously exclusive to old taxation regime, is a corrective measure to rectify an earlier omission and promote fairness between the regimes and also seems to subtly hint at Government's intention to promote new tax regime while gradually phasing out old tax regime.

All in all, this budget was truly a vote on account, with FM adhering to her promise of minimal changes in this interim phase. The address conveyed a sense of confidence, hinting at Government's expectation of a successful return post-elections and subsequent focus on comprehensive budget in July this year. FM's strategic decision to refrain from major changes during this interim period reflects a deliberate effort to ensure stability and continuity. This cautious approach sets the stage for anticipation of more substantial budgetary adjustments and policy considerations later in the year, showing Government's commitment to truly transforming India into "Viksit Bharat" in every step of the way.

Views are personal. Nangia is Chairman, Nangia Andersen India; Jhunjhunwala is Partner, Nangia Andersen India.