Finance Minister Nirmala Sitharaman unveiled the the first Union Budget 2024-25 of Prime Minister Narendra Modi’s third term. Key points include a new income tax structure, a 4.5% fiscal deficit target for FY25, and changes to customs duties on gold, silver, and telecom equipment. The budget focuses on nine areas for “Viksit Bharat,” like agriculture, employment, urban development, and energy security, with special focus on support for the poor, women, youth, and farmers.
Finance Minister Smt Nirmala Sitharaman presented Union Budget 2024-25 today, the first one under the Modi government’s third term. The budget outlined sustained efforts on nine priorities to create ample opportunities for all.
Among the key highlights, India’s fiscal deficit in 2023-24 was at a lower 4.9% of GDP, and the government has set a target of reducing it further to 4.5%. Further, the government introduced a revised income tax structure alongside an increase in the long-term capital gains tax.
Budget 2024 focused on nine priority areas for “Viksit Bharat”:
The government emphasized its commitment to four social classes: the poor, women, youth, and farmers. The budget’s theme revolved around employment, skilling, MSMEs, and the middle class.
The budget also highlighted strong economic foundations, noting improvements in the current account deficit, an 8.2% GDP growth rate in FY24, and a reduction in inflation from 6.7% in 2022 to 5.4% in 2023. Following are some of the key announcements:
In a significant investment push, the government has allocated Rs. 11 lakh crore, equivalent to 3.4% of GDP, for capital expenditure on infrastructure. This includes addressing housing needs with 3 crore houses under PMAY2 across rural and urban areas, supported by necessary allocations.
Specifically, PM Awas Yojana-Urban will focus on constructing 1 crore dwellings with an investment of Rs. 10 lakh crore. Additionally, over 1,000 branches of India Post Payments Bank are slated for establishment in the North East, enhancing financial inclusion. Transit-oriented development plans are set for 14 major cities, aiming to improve urban mobility and efficiency.
Furthermore, Bihar will witness the development of new airports, medical colleges, and sports institutions, alongside an allocation of Rs. 26,000 crore for road projects. Andhra Pradesh will receive financial support totaling Rs. 15,000 crore in the fiscal year 2024-25, further bolstering infrastructure and development initiatives in the state.
Finance Minister Nirmala Sitharaman has announced significant support measures for Micro, Small, and Medium Enterprises (MSMEs. These measures include a ₹100 crore Credit Guarantee Schemefor machinery and equipment loans without collateral, a new assessment model for MSME credit by public sector banks during the Special Mention Account (SMA) stage, and the establishment of e-commerce export hubs to aid traditional artisans and MSMEs in accessing global markets.
Additionally, the Mudra loan limit under the ‘Tarun’ category will increase to ₹20 lakh from the current ₹10 lakh. Expansion plans for the Small Industrial Development Bank of India (SIDBI) aim to cover 168 MSME clusters. Plans also include the development of twelve industrial parks as part of the National Industrial Corridor Development Programme, the establishment of an export hub, and enhancements to MSME units for food irradiation and quality testing. Mandatory onboarding on TReDS platforms will be expanded, and credit support will be provided to MSMEs during periods of financial stress.
The government plans to develop the Vishnupad temple corridor and Mahabodhi temple corridor, inspired by the Kashi Vishwanath temple corridor model. A comprehensive development initiative for Rajgir, significant to Hindus, Buddhists, and Jains, is also on the agenda. Additionally, efforts will focus on transforming Nalanda into a tourist hub and revitalizing Nalanda University.
Furthermore, support will be provided for the development of Odisha’s scenic beauty, temples, monuments, craftsmanship, wildlife sanctuaries, natural landscapes, and pristine beaches, aiming to establish it as a premier tourism destination.
The Finance Minister announced that 58% of tax revenue in the financial year 2024 came from a simplified corporate tax regime. It was also stated that the government will undertake a comprehensive review of the Income Tax Act to enhance readability.
Under the proposed tax reforms, a simpler regime will govern domestic cruise operations, scrapping taxation for cruise ships and setting profits and gains for operators at 20% of the total received amount. Safe harbour rates will be introduced for foreign mining companies selling raw diamonds.
During the Union Budget speech, it was mentioned that a standard operating procedure (SoP) for TDS defaults will be introduced and efforts will be made to simplify and rationalise compounding of such offences. The two tax exemption regimes for charitable trusts were announced to be merged into one. Additionally, the corporate tax rate for foreign companies will be reduced from 40% to 35%.
Under the new personal tax regime, salaried employees will benefit from an increased standard deduction, raised from ₹50,000 to ₹75,000. According to the finance minister, these changes could lead to significant tax savings, potentially reducing their annual income tax burden by up to ₹17,500. Additionally, the government has raised the deduction limit for employers’ contribution to the National Pension System (NPS) to 14% from 10%, and increased the deduction on family pension for pensioners to ₹25,000 from ₹15,000.
Certain revisions were proposed to the tax rate structure in the new tax regime, which resulted in alterations to the income tax slab.
To bolster the Indian startup ecosystem, the government made a pivotal announcement – removal of angel tax for all categories of investors. Additionally, the government plans to aid Frmer-Producer Organizations, cooperatives and startups in the vegetable supply chain by improving connectivity, storage facilities, and marketing support. Furthermore, a Rs 1,000 crore fund has been announced by the Finance Minister to support spacetech startups.
As the fifth scheme under the Prime Minister’s package, the government will launch a comprehensive scheme to provide internship opportunities in 500 top companies to 1 crore youth over five years. This will help them gain exposure to real-life business environments, varied professions, and employment opportunities for 12 months. An internship allowance of ₹5,000 per month, along with a one-time assistance of ₹6,000, will be provided. Companies will bear the training cost and 10% of internship cost from their CSR funds.
The government will facilitate the development of investment-ready “plug and play” industrial parks with complete infrastructure in or near 100 cities, in partnership with the states and private sector, utilizing town planning schemes. Additionally, twelve industrial parks under the National Industrial Corridor Development Programme will be sanctioned.
The government will facilitate rental housing with dormitory-type accommodation for industrial workers in a PPP mode with VGF support and commitment from anchor industries.
A Critical Mineral Mission will be established for domestic production, recycling of critical minerals, and overseas acquisition of critical mineral assets. The mission will focus on technology development, a skilled workforce, an extended producer responsibility framework, and a suitable financing mechanism.
In the services sector, the government will develop Digital Public Infrastructure (DPI) applications at a population scale for productivity gains, business opportunities, and innovation by the private sector. These applications will cover areas such as credit, e-commerce, education, health, law and justice, logistics, MSME, services delivery, and urban governance.
An Integrated Technology Platform will be established to improve outcomes under the Insolvency and Bankruptcy Code (IBC) by ensuring consistency, transparency, timely processing, and better oversight for all stakeholders.
The government has implemented several key changes across various sectors to stimulate growth and support specific industries. Import duties on critical minerals like lithium have been waived, with proposals for full exemption on 25 critical minerals.
The government has allocated Rs 1.52 lakh crore for agriculture and allied sectors, emphasizing sustainable practices and digital infrastructure. A significant initiative includes transitioning 10 million farmers to natural farming methods, while promoting large-scale vegetable production clusters to stabilize supply nationwide.
Prioritizing agricultural research, efforts will focus on developing climate-resilient crop varieties, with plans to release 109 such varieties across 32 different crops. Additionally, 10,000 bio-input centers will be established to support oilseed production’s efficiency from production to market. Digital public infrastructure will be expanded through state partnerships, facilitating a digital crop survey in 400 districts during the Kharif season.
The government aims to issue Jan Samarth-based Kisan Credit Cards in five states, aiding farmers in accessing financial services.
Furthermore, NABARD will facilitate financing for shrimp farming, processing, and exports, and about 6 crore farmers’ details will be registered in Farmer & Land registries using DPI technology, benefiting farmers across five states.
The government has announced that it will implement three schemes for ‘Employment Linked Incentive’ as part of the Prime Minister’s package. These schemes will be based on enrolment in the EPFO.
Scheme A: First Timers
This scheme will provide one month’s wage to all persons newly entering the workforce in all formal sectors. The direct benefit transfer of one month’s salary, in three installments, to first-time employees registered in the EPFO, will be up to ₹15,000. The eligibility limit will be a salary of ₹1 lakh per month. The scheme is expected to benefit 210 lakh youth.
Scheme B: Job Creation in Manufacturing
This scheme will incentivize additional employment in the manufacturing sector, linked to the employment of first-time employees. An incentive will be provided at a specified scale directly to both the employee and the employer concerning their EPFO contribution in the first four years of employment. It is expected to benefit 30 lakh youth entering employment, and their employers.
Scheme C: Support to Employers
This employer-focused scheme will cover additional employment in all sectors. All additional employment within a salary of ₹1 lakh per month will be counted. The government will reimburse employers up to ₹3,000 per month for two years towards their EPFO contribution for each additional employee. The scheme is expected to incentivize additional employment of 50 lakh persons.
Besides this, a new centrally sponsored scheme for skilling, in collaboration with state governments and industry, will be introduced under the Prime Minister’s package. Over a five-year period, it aims to skill 20 lakh youth and upgrade 1,000 Industrial Training Institutes in a hub and spoke arrangement with outcome orientation. Course content and design will be aligned to the skill needs of industry, and new courses will be introduced for emerging needs.
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