Interim budget Part B

Introduction

In a pivotal moment ahead of the impending Lok Sabha elections, Union Finance Minister Nirmala Sitharaman presented the Interim Budget 2024, marking her sixth consecutive budget address. In a departure from populism, Sitharaman maintained the status quo on tax rates, both for direct and indirect taxes. The budget envisions unprecedented growth, with a noteworthy Rs 11.1 lakh crore allocated for capital expenditure in the upcoming fiscal year—an 11% surge from the present fiscal year. Aiming to curtail the fiscal deficit, the government targets 5.1% of GDP in the upcoming year and sets sights on further reductions to 4.5% in FY26. Given the interim nature of this budget, a more comprehensive fiscal year budget is anticipated after the formation of a new government following the Lok Sabha Elections.

What is an interim budget?

An interim budget is submitted to Parliament by the government when there is insufficient time for a complete budget presentation or when general elections are imminent. In the event of upcoming elections, it is customary for the incoming government to formulate a comprehensive budget.

Part B of the budget includes details pertaining to both direct and indirect taxes, including any adjustments in income tax slabs, customs, excise duty, and other relevant aspects. Additionally, the annex section will provide a consolidated summary of all the tax-related announcements.

The presentation also discloses the proportion of the budget financed by extra-budgetary resources, encompassing funds beyond tax and non-tax revenue.

The budget's revenue and expenditure document will provide estimates on the anticipated income from sources such as income tax, corporate tax, GST, excise duty, and more. Expenditure includes the ministry-wise breakdown of expenses in defense, education, health, etc.

As an integral component of the annual budget, the Finance Bill is introduced, outlining information on the imposition, abolition, remission, alteration, or regulation of taxes. The budget undergoes approval initially in Lok Sabha before proceeding to Rajya Sabha, where it undergoes debates and discussions.

The interim budget will specifically outline the expenditure for the initial months of FY2024–25, covering the period until a new government is elected in the Lok Sabha elections in 2024.

PART-B SUMMARY

Direct taxes

1. The finance minister suggests maintaining the existing tax rates for direct taxes.
2. Direct tax collection tripled, and return filers increased by 2.4 times in the last 10 years.
3. Government to improve tax payer services
• Outstanding direct tax demands up to Rs 25000 pertaining to the period up to FY 2009–10 were withdrawn.
• Outstanding direct tax demands up to Rs 10,000 for financial years 2010–11 to 2014–15 were withdrawn.
• This will be advantageous for one crore taxpayers.
4. Tax benefits to start-ups, investments made by sovereign wealth funds, or pension funds were extended to March 31, 2025.
5. Tax exemption on certain income of IFSC units was extended by a year to 31.03.2025 from 31.03.2024.

Indirect taxes

1. The finance minister suggests maintaining the existing tax rates for indirect taxes and import duties.
2. GST streamlined the previously fragmented indirect tax system in India.
3. The average monthly gross GST collection doubled to Rs 1.66 lakh crore this year.
4. The GST tax base has doubled.
5. State SGST revenue buoyancy (including compensation released to states) increased to 1.22 in the post-GST period (2017-18 to 2022-23) from 0.72 in the pre-GST period (2012-13 to 2015-16).
6. 94% of industry leaders view the transition to GST as largely positive.
7. GST led to supply chain optimization.
8. GST reduced the compliance burden on trade and industry.
9. Lower logistics costs and taxes helped reduce the prices of goods and services, benefiting consumers.

Achievements in tax-payer services

1. The average processing time for tax returns has decreased to 10 days from the 93 days recorded in 2013–14.
2. The introduction of Faceless Assessment and Appeal aims to enhance operational efficiency.
3. Updated income tax returns, new Form 26AS, and prefilled tax returns for simplified return filing.
4. Reforms in customs leading to reduced Import release time

• Reduction by 47% to 71 hours at Inland Container Depots
• Reduction by 28% to 44 hours at Air Cargo complexes
• Reduction by 27% to 85 hours at Sea Ports

Tax rationalization efforts over the years

• There is no tax liability for income up to Rs 7 lakh, a significant increase from Rs 2.2 lakh in FY 2013–14.
• The presumptive taxation threshold for retail businesses has been raised to Rs 3 crore from Rs 2 crore.
• The presumptive taxation threshold for professionals has been raised to Rs 75 lakh from Rs 50 lakh.
• Corporate income tax decreased to 22% from 30% for existing domestic companies.
• Corporate income tax rate at 15% for new manufacturing companies.

Conclusion

In her sixth consecutive budget presentation, Finance Minister Nirmala Sitharaman unveiled the Interim Budget 2024 amid the approaching Lok Sabha elections. Prioritizing fiscal prudence, she maintained existing tax rates and forecasted an optimistic trajectory with a substantial Rs 11.1 lakh crore allocated for capital expenditure—an 11% increase from the current fiscal year. The government aims to trim the fiscal deficit to 5.1% of GDP in the upcoming year and further to 4.5% in FY26. This interim budget sets the stage for economic resilience, with a more comprehensive fiscal-year budget anticipated post-election and the formation of a new government.

References

1. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2001136
2. https://kpmg.com/in/en/home/services/tax/india-interim-budget-2024.html
3. https://economictimes.indiatimes.com/news/economy/indicators/india-budget-2024-key-highlights/articleshow/107306551.cms