Riding on high economic growth and robust revenues, Finance and Corporate Affairs Minister Nirmala Sitharaman on Tuesday presented a budget focused on youth and middle-class, job generation, and a push for MSMEs and manufacturing in the country.
While catering to the salaried class, youth and farmers, Sitharaman disappointed the futures and options segment in the capital market by hiking Securities Transaction Tax on F&O trades. As expected, the capital gains taxation regime was also rationalised both on rates and the holding period for financial assets.
Creating history by presenting her seventh straight budget, Sitharaman announced a Prime Minister’s package of five schemes and initiatives to facilitate employment, and skilling for 4.1 crore youth over a five-year period with central outlay of ₹2 lakh crore.
The Congress claimed credit for the job-oriented schemes for youth. “I am glad to know that the Hon’able FM has read the Congress Manifesto LS 2024 after the election results. I am happy that she has virtually adopted the Employment-linked incentive (ELI) outlined on page 30 of the Congress Manifesto. I am also happy that she has introduced the Apprenticeship scheme with an allowance to every apprentice spelt out on page 11 of the Congress Manifesto,” said former finance minister P Chidambaram on social media X.
Capex and fiscal consolidation
While keeping capex allocation for infrastructure unchanged at ₹11.11 lakh crore (same as in the interim budget), the Budget also accelerated fiscal consolidation efforts by pegging the end-March 2025 fiscal deficit target at 4.9 per cent of GDP, as against 5.1 per cent in the interim budget. Sitharaman made it clear that the Centre remained committed in its fiscal support towards infrastructure development for the next five years.
On direct taxes, Sitharaman announced that a comprehensive review of the Income Tax Act would be undertaken and completed within six months. She also announced rationalisation of the capital gains taxation regime, cut in corporate tax rate for foreign companies from 40 per cent to 35 per cent, and a hike in securities transaction tax (STT).
Angel tax abolished
Besides the abolition of angel tax and equalisation levy, Sitharaman announced that standard deduction for employees opting for the new taxation regime will be increased from ₹50,000 to ₹75,000. This will benefit nearly 4 crore salaried employees. Besides tweaking income-tax slabs for personal income tax, Sitharaman also announced simplification of the tax regime for charities and changes in TDS rates.
On capital gains taxation, Sitharaman announced a hike in long-term capital gains tax on financial assets at 12.5 per cent and the classification of financial assets held for more than a year as long-term. She also announced a hike in the short-term capital gains tax rate to 20 per cent, besides changing the taxation on buyback to be taxed at the hands of recipient.
For the urban poor, Sitharaman announced allocation of ₹10 lakh crore to build one crore houses.
Bowing to the compulsions of a coalition government, the Budget has also promised financial support to the states of Andhra Pradesh and Bihar, including helping both secure financial assistance from multilateral development financial institutions. Aid of ₹15,000 crore this financial year (and subsequent years as well) would be extended to Andhra Pradesh to develop its capital, Amaravati, Sitharaman said. “Our government is fully committed to financing the early competition of Polavaram project, which is the lifeline of Andhra Pradesh and its farmers. This will facilitate our country’s food security as well,” she added.
In a pre-budget meeting, Andhra Pradesh Chief Minister Chandrababu Naidu, a key ally of the Modi 3.0 government, had sought a grant of ₹15,000 crore for the construction and development of Amaravati as the sole capital of Andhra Pradesh.
Budget 2024 also has support for new airports, medical colleges, irrigation projects and highways in Bihar.
As part of its MSME focus, a credit guarantee scheme was announced for such enterprises in the manufacturing sector. A package will be formulated to finance technology support for MSMEs. Sitharaman also proposed to increase the Mudra loan limit to ₹20 lakh from ₹10 lakh for those who have repaid past loans.
She announced a scheme to offer internships in top companies to one crore youth over five years.
A financial sector vision document that sets the agenda for the next five years would be prepared, she said.