In this article, we will discuss
After the Lok Sabha elections, the Union Budget 2024 is the next big nationwide news that investors have been anticipating over the past weeks. Scheduled for July 23, 2024, the Union Budget of India is a hot topic of discussion for salaried people, businesspersons, analysts, investors and policymakers alike.
As we stand at the threshold of the new Union Budget, let us explore the various expectations abuzz in the markets.
Top Expectations from the Union Budget 2024 in India
Finance Minister Nirmala Sitharaman has presented six Union Budgets in India so far, and the new Union Budget due on July 23 will be the seventh one presented by the minister. With only a few days left for the announcement, here are the top expectations from the current Union Budget.
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Tax Benefits for the Middle Class
One of the most widespread expectations is major tax breaks for middle-class taxpayers — particularly those earning up to Rs. 10 lakhs per annum. This can be especially beneficial for salaried taxpayers who are just starting their careers or earning low income but paying high taxes.
If the Union Budget offers any major tax relief to taxpayers in this category, it can increase their disposable income and act as an impetus for them to save and invest more. Given that there have been no major tax relief measures in the two previous budgets — save for the introduction of the new tax regime — many experts anticipate that the current Union Budget may introduce some major tax relief reforms for this taxpayer category.
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An Increase in the Basic Exemption Limit
The basic exemption limit is the minimum amount on which no tax is payable. With inflationary pressures mounting and the cost of living increasing steadily, many taxpayers expect that the government may announce higher basic exemption limits in the Union Budget 2024.
Currently, the basic exemption limit is set at Rs. 3 lakhs. This is expected to increase to Rs. 5 lakhs. If this reform is introduced, taxpayers who earn over Rs. 7 lakhs annually and are ineligible for rebate u/s 87A could save around Rs. 10,000 in taxes.
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Enhanced Deductions Under the New Tax Regime
The new tax regime, which was introduced in the Union Budget 2020, cut down the tax rates but also eliminated various deductions available to taxpayers. This has been a pain point for many individuals who have planned their tax-saving exercise around the many deductions available in the old tax regime.
The new regime is now the default option. So, taxpayers are hopeful that some of the deductions under this regime may be enhanced to make it more beneficial. More specifically, the standard deduction, deductions under sections 80C and 80D and deductions for housing loan interest are expected to be increased under the new tax regime.
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Tax Benefits for Health Insurance
Currently, premiums paid for health insurance plans are deductible under section 80D of the Income Tax Act, 1961. The deduction limit for non-senior citizens is Rs. 25,000, while the limit for senior citizens is Rs. 50,000. However, this benefit is only available under the old tax regime.
Considering that the deduction limit has remained unchanged for the past nine years, industry experts expect higher tax benefits in this area. An increase in the deduction limit could make the tax savings commensurate with the rise in healthcare costs and insurance premiums in India. This, coupled with potentially extending the benefits of section 80D to the new tax regime, can be a welcome change for taxpayers.
Other benefits expected in this area include reforms like negotiated rates that make health insurance more accessible to employees and reducing the rate of GST on medical covers. These measures could make it easier for the middle-class taxpayer population to invest in health insurance without putting off buying this crucial financial safety net.
Sectoral Expectations from the Union Budget 2024
Moving on from individual taxpayer expectations, we find that companies from different sectors are also looking forward to some key reforms from the Union Budget 2024. Let us delve into what different economic sectors have on their wishlist for the upcoming budget.
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Real Estate Sector Expectations
The real estate sector has high expectations for Budget 2024. Key demands include GST rate rationalisation, revival of affordable housing initiatives and granting full industry status. The sector, which contributes about 8% to GDP, also seeks an increase in home loan interest deductions from Rs. 2 lakhs to Rs. 5 lakhs to offset rising EMIs.
Despite the record-breaking sales of 4.93 lakh units in FY24, stakeholders are calling for the revival of affordable housing schemes like the credit-linked subsidy under PMAY. Other requests include streamlining clearances, redefining Priority Sector Lending limits (from Rs. 35 lakhs to Rs. 50 lakhs in metros) and adjusting income criteria for EWS and LIG categories.
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Agricultural Sector Expectations
The agricultural sector anticipates significant support from the upcoming Union Budget 2024. Industry leaders are calling for measures to bolster domestic agrochemical production, so we can reduce our dependence on Chinese imports. Proposed strategies to this end include implementing Production-Linked Incentive benefits and adjusting import duties to favour local manufacturers.
The sector also seeks a reduction in the GST rates from 18% to 5% to alleviate the financial burdens of farmers and boost their income. There are hopes for incentives to promote technological advancements — like drone services and modern machinery adoption. Additionally, there is a strong emphasis on the need for stringent regulations to curb the circulation of counterfeit and substandard agrochemicals to ensure product safety and integrity in the Indian market.
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Healthcare Sector Expectations
The healthcare sector anticipates substantial reforms in the upcoming Union Budget. Industry experts are emphasising the need for increased healthcare spending, aiming to reach 2.5% of GDP by 2025 as per the National Health Policy 2017. Another key focus area is the integration of technology into public healthcare systems, with calls for collaboration between the government, organisations and startups to enhance service delivery and monitoring across various healthcare channels.
The budget is also expected to focus on improving access to generic medicines. Despite existing initiatives like the Pradhan Mantri Jan Aushadhi Yojana, challenges persist in quality control and prescription practices. So, the sector is advocating for stricter enforcement of prescription laws, particularly mandating the use of drug names instead of brand names in prescriptions. This change is expected to increase transparency and directly benefit consumers as it could be a significant step towards a more efficient and accessible healthcare system.
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The IT Sector’s Expectations
The IT sector is looking forward to the Union Budget 2024 with high hopes as it sees a chance to grow and change. More specifically, experts in the sector want the budget to focus on digitalisation using new tech. This could have a favourable impact on various industries like finance, shopping, healthcare and more.
The sector also believes that investing in research and skilled workers is key. This could help India's IT companies compete better globally as they could attract more international clients and partners. A potential focus on being eco-friendly could also help as it may pave the way for new tech solutions that are good for the environment. This could, in turn, open doors for work in areas like farming tech, electric cars and clean energy. All these steps could bring in more foreign money and help Indian IT firms grow worldwide.
Expectations for MSMEs
The MSME sector also has high expectations for the upcoming Union Budget 2024. The focus lies on the following key areas:
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Workforce Development
The sector is calling for substantial funding for skill development programs, especially in emerging technologies like automation, AI and data analytics. This is crucial given that only 10% of Indian workers have formal training (as opposed to 60% to 90% of the workforce in developed countries). To encourage ongoing learning, the sector is looking forward to tax incentives for MSMEs investing in employee training.
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Financial Support
According to the RBI, we have a credit gap going up to Rs. 25 crore in the MSME sector. So, the Union Budget addressing the persistent issue of affordable and timely financing is a top priority for MSMEs. The sector hopes for an expansion of programs like the Emergency Credit Line Guarantee Scheme and the Partial Credit Guarantee Scheme to bridge the substantial credit gap estimated by the RBI.
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Regulatory Improvements
There's also a strong anticipation for policies that could simplify compliance, reduce bureaucracy and streamline approvals. This would allow MSMEs to focus more on their core business activities and improve India's global ease of doing business ranking from its current position in the 63rd place.
Conclusion
While expectations abound, it remains to be seen which of the demands are fulfilled by the Union Budget 2024, and which ones may not be a part of the announcements. The budget may also include some unexpected reforms that could have a positive impact on various sectors in the long run. Follow the news to remain updated about any further developments regarding the Union Budget.
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