The impending general elections give considerable weight to the interim budget 2024 that is presented in Parliament.
CY 2023 has demonstrated the resilience of the Indian economy, despite geopolitical tensions, inflation fears, and low domestic employment growth.
The populace of India is optimistic about the long term but pessimistic about the short term. This is primarily manifested through the unemployment rate and inflation, as well as the loss of jobs. Supply chain issues and intense pressure on MSMEs to obtain working capital on time persisted in 2023, just as they did in 2022.
Conversely, all governmental indicators suggest a favourable direction, encompassing tax collections that surpass initial projections throughout the entirety of 2023, enhanced manufacturing activity facilitated by the PLI Scheme, and an optimistic outlook for the economic trajectory of India.
As per EZTax, the budget for 2024 will allocate significant resources towards promoting the 'Make in India' initiative to provide a viable alternative to the declining Chinese manufacturing sector. A persistent focus on assisting the middle class is also anticipated; individuals depend on agriculture, which will likely be a determining factor in the general elections of 2024.
Anticipated in Budget 2024, like Budget 2023, are tax structures that incentivize investments in startups specializing in national construction, agricultural, and defence products and services. Without imposing new taxes, it is anticipated to implement fiscal prudent measures, such as a special vehicle to increase tax enforcement and collect more revenue.
Expected to assert on Self-Reliance schemes in Defence and Technology adoption to boost employment.
- The NDA government has maintained an interest in "minimum government and maximum governance" for over nine years, making it feasible to implement audacious reforms such as privatizing non-functional PSUs, automating processes, and centralizing government functions in order to decrease expenditures and improve governance.
- This is anticipated to persist for the subsequent one to two budget periods on account of the absence of market support and the surrounding challenges.
- Incentives or programs designed to assist MSMEs in obtaining low-cost working capital and suitable financing.
- As stated in 2022 budget expectations, to stimulate the MSME sector, it is recommended that the local sourcing requirements for major public corporations and the government, and multi-national e-commerce be increased.
- Development of infrastructure in the direction of constructing workhouses and other workspaces within industrial clusters.
- Incentives for the innovation, technological adoption, and digitization of operations by MSMEs.
- A reduction in paperwork and compliance obligations to facilitate the operation of small enterprises.
- Implementing strategies to counter the recent restriction imposed by the RBI on NBFC lending practices to MSMEs would be of immense relief.
- Increase the incentives provided to start-ups that innovate and provide employment in the defence, agriculture, and national construction sectors.
- With rural economies in mind, reduce or modify the GST rates on essential goods.
- GST Compliance: Avoid frequent changes to the process and systems. GST is not the problem for the economy; it's the demand. Enforce full GST, including the reverse-charge mechanism, for proper ITC.
- GST Compliance: Re-organise GST Slab Rates to promote employment along the lines of raw (lower GST Slab), processed (manufactured), heavily processed, and imported (higher GST Slab).
- Amnesty Scheme: Amnesty scheme should be introduced in GST to settle the demands as per recent GST Notices and file the pending returns.
Theme of the Budget 2024 is expected to be Make in India
- Budget 2024 and income tax reforms in India should prioritize expanding the tax base and simplifying tax compliance.
- Budget 2024 is expected to announce the sunset of the previous tax regime and the complete implementation of the new tax regime, which will facilitate tax compliance.
- Increase the income tax rebate under new tax regime to Rs. 30,000 to make the taxable income as tax free up to Rs. 7.5 Lakhs (which is currently set in Budget 2023 to Rs. 7 Lakhs)
- Like the new tax regimes, the basic exemption limit for filing income tax returns under the old tax regime could be raised to Rs. 3 lakhs.
- Only bank-deposited (or digital) house rents should be allowed to be considered for HRA (under the old tax regime).
- Increase standard income tax deduction for self-occupied home loan to Rs. 3L to promote housing and savings.
- Housing costs have skyrocketed. Important to boost housing employment.
- Promote a reimbursement for a small family of four (wife, husband, and two children). Introduce "family" as an IT return category for incentivized family filing. Our country values family, and IT compliance should reflect that.
- Placing utmost significance on "ease of doing business" is crucial. Tax exemptions are unnecessary. In India, bureaucracy is a killer of innovation and entrepreneurship.
- Special Fund to Reduce Human Intervention in Company Compliance through Automation to limit the tax expert's participation throughout the lifecycle of the company for revenues not exceeding Rs. 10 crores.
- Refine the definition of a capital asset; proceeds can be reinvested in any other capital asset while remaining taxed at a single rate. No short or long- term allowed. Remove STT.
Introduce the super-long term. Proceeds can be reinvested in any capital asset. Maintain three CG rates uniformly across all asset classes. Remove STT.
EASE OF DOING
- Ease of Starting Business: For companies limited liability partnerships (LLPs), and private companies with an annual revenue of less than Rs. 10 crores, the majority of professional certifications ought to be eliminated. At the same time, severe compliance standards must be enforced for annual revenue exceeding Rs. 10 crores.
- Ease of Doing Business: Activate Aadhaar-based eSigns and KYC for IT Returns and ROC Compliances. This will simplify use and reduce DSC fraud.
- Give small and medium-sized enterprises a fair chance to succeed in the eCommerce ecosystem.
- Root Cause of Loan defaults: Strengthen lending asset valuation standards. Link and enforce GST turnover in income tax files immediately to avoid overstated turnovers and bad loans.
- Cost of Money: Promote zero-MDR government payment and wallet services (Rupay and UPI). All payment gateways should implement this immediately as not all have done so after three years. Paper currency and digital currency should have no transaction expenses. The 2.5% MDR makes digital Rs. 100 Rs. 97.5 today (need to fix it soon).
- EZ Loans to SMEs: Allow GST turnover and sector-specific variables to determine online EZ Loans. Eliminate non-material third-party / professional balance sheet certifications to create STP loan criteria.
- Cost of Credit: 1 year of interest-free, collateral-free credit for qualified MSMEs (providing components to military space) with credit history or collateral.
- In last year's pre-budget projections, we suggested the Institutional Industry Quotient (IIQ) for scaled innovation in India that boosts GDP. It remains a low-cost, high-impact effort.
- Increase the institution-industry quotient (IIQ) for synergy and innovation. Increased funding must include IIQ. Start with the institution and encourage entrepreneurship.
- Re-enforcing asset value to reduce NPAs, privatizing some banks, and redefining banks' roles as strategic rather than infrastructural will provide significant funds for the government to invest in next-generation infrastructure.
- Increase the domestic sourcing requirement for all public sector spending to expand automation opportunities for domestic technology enterprises and startups.
In conclusion, although the economy is exhibiting signs of growth, resilience, and assurance, it remains critical to address the matter of employment within the nation and beef up the sourcing requirements through Make in India initiative for security infrastructure, which is essential to say the least.
It is necessary to realign frameworks and budget allocation to attain a more favourable employment outcome.