Union Budget 2024-25: What To Expect?

Finance Minister of India, Dr Nirmala Sitaraman, will present the 2024-2025 union budget today, February 1, with high expectations for the healthcare, education, infrastructure, and income tax fronts. With this new budget, the government hopes to sustain the nation’s economic growth and attain a lower than previous year and acceptable fiscal deficit target. In its latest report, the finance ministry stated that India will grow at a rate of 7% a year for at least the next six years and is also expected to become the third-largest economy in the world within the next three years. 

Although fresh schemes are not announced in the interim budget, many people expect the government to introduce some doles, citing the general election ahead. Radhika Rao, Senior Economist and Executive Director of DBS Group Research said, “There are expectations of little relief for the rural farm sector whilst a capex push persists.”

The Union Budget 2024 is anticipated to be a vote on account rather than a comprehensive budget. It serves as a provisional declaration of funds needed by the government before a new administration assumes office post-election. As per the report on money control, Nirmala Sitharaman is expected to announce a series of measures to boost consumption and implement reform policies.

Railway Will Get Boost In Capital Expenditure

According to the Analysts of Business Today, Indian Railways is expected to receive a boost in capital expenditure. The Finance Minister may allocate more funds to facilitate a significant transformation of existing and the introduction of modern and high-speed trains. An interim budget for 2024-25 will likely allocate an estimated Rs 2.8-3 lakh crore to Indian Railways to keep its capex momentum intact. 

Analysts in Prabhudas Lilladher, Elara Capital, and Icra confirmed that the upcoming budget could see a significant jump in Capex, considering the special emphasis on the modernisation of Railways.

“We expect adequate allocations towards the infrastructure sectors such as roads, highways and railways in 2024-25. The defence outlay — on R&D and acquisitions — may be enhanced further, amid the government’s focus on encouraging the development and production of emerging technologies.”- Icra

Revision in Limit of Deduction

As per Section 80C, the deductions available are capped at Rs 1.50 Lakhs per year. This limit was revised from Rs 1.50 Lakhs to Rs 1 Lakh in 2014. In an Interim budget, analysts expected that the government would revise the limit of deductions, which might increase. Based on the recent report by LiveMint, the earlier limit of Rs 1 Lakh was fixed in 2003, and it has been almost 18 years since this original limit was fixed. Since 2014, it has also increased by 50%, less than 3% annually. This deduction limit is expected to increase to Rs 2.50 Lakh depending on an interim budget for 2024-25.

Changes in Tax Slabs

In an Interim budget, slight changes in tax slabs might benefit the middle-class section. Last year, Nirmala Sitharaman tweaked the income slabs for individuals opting for the new income tax regime. Since 2014, the tax slab has remained the same. Agam Gupta, Executive Director of Share India Fincorp, said, “Indexing tax slab limits to inflation would put more money in the hands of middle-class consumers to counter cost pressures without fiscal damage.”

Emphasis on the EV Sector

As the government plans to bring the budget 2024-25, there should be an emphasis on the Electric Vehicle(EV) sector. According to the Economics Times report, the central government may extend incentives under the FAMEscheme designed to boost EV manufacturing. There is also hope for the revaluation of the tax regime of 18% on lithium-ion batteries. In addition, there might be an expansion of the Production Linked Incentive(PLI) schemes with an allocation of up to Rs 800 crore under FAME II for the fast charging stations.

Expectations for Energy Sector

Ahead of the interim budget 2o24-25, India Energy Storage Alliance(IESA) expects the following things for the energy sector. On February 1 2024, Nirmala Sitharaman might give relief to the energy companies.

Tax Holidays: Analysts at IESA forecasted that the government will emphasise 10-year tax holidays for projects with Standalone Battery Energy storage using RE to charge the battery. 

GST Reduction: As per the current GST regime, the tax rate on lithium-ion batteries is 18% and on advanced batteries, there is a higher range between 8-28%. However, IESA suggested that the government consider reducing the GST rate and bringing a uniform rate of 5%.

Exemptions on Excise Duty: In a forecasting report of LiveMint, it is seen that the government can exempt custom duty on energy storage systems being imported from the countries where India has tied on free trade agreements, which includes Vietnam, USA, Taiwan, Japan, etc.

The union budget 2o24-25 may relieve various sectors as the government is expected to emphasise the Indian railways and energy sector. The Finance Minister will officially present the budget in parliament on February 1, 2024, which will uncover the new regimes in more detail.

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