What to Expect in the Union Budget?

On July 23, 2024, Finance Minister Nirmala Sitharaman will deliver the first comprehensive Union Budget of the Narendra Modi 3.0 government. In the upcoming years, India's economy is expected to develop to become the third largest in the world, and all eyes will be on Budget 2024 to continue this pace. Furthermore, since this is the first Union Budget following the Lok Sabha elections, there is hope that Sitharaman may lower income taxes to provide the average person and even the middle class access to more money. It is anticipated that the Modi administration would keep emphasising capital expenditures to boost GDP growth, with a focus on infrastructure development in particular.

Budget Highlights 2024

Below is a list of union budget expectations 2024:

• Ahead of the budget, the US-India forum urges FM Sitharaman for a stable & predictable tax environment.
• Union budget to focus on welfare spends, incentivise deposit inflows, Care Ratings says.           
• Government likely to scale down the fiscal deficit target to 5% or less in the Budget, says ICRA.
• Union budget likely to include International Credit Card transactions under TCS framework.

Ahead of budget, US-India forum urges FM Sitharaman for stable & predictable tax environment

The US-India Strategic Partnership Forum has encouraged Union Finance Minister Nirmala Sitharaman to provide a stable and predictable tax environment as she prepares to present her annual budget later this month.

The US-India Tax Forum, a specialised Tax Policy Forum of the US-India Strategic Partnership Forum (USISPF), said this in a series of recommendations to Sitharaman.

According to a news release from the US ISPF, a stable and predictable tax environment is critical to boosting investment optimism across industries.

"The industry eagerly anticipates the Union Budget 2024-25, the first budget of the re-elected Government, which is expected to introduce measures that will stimulate growth across sectors," it said.

Union budget to focus on welfare spends, incentivise deposit inflows, Care Ratings says

Higher outgoes on welfare schemes to sustain the declining consumption growth would be among the primary focal areas in the Union Budget to be presented next week, a domestic rating agency said on July 16.

According to Care Ratings, the Budget would consider increasing allocations to the rural sector, welfare systems, and agriculture in order to boost consumption.

Welfare initiatives may receive a greater allocation in the budget, according to the report, with revenue spending potentially increasing by Rs 75,000 crore above the amount in the interim Budget given earlier this year.

The government is anticipated to increase allocations to employment guarantee programs, PM Awas Yojana, PM Gram Sadak Yojana, PM Kisan Samman Nidhi, and plans for labour-intensive small enterprises, according to the agency.

Govt likely to scale down fiscal deficit target to 5% or less in Budget, says ICRA

The government is expected to reduce the budget deficit to 4.9-5% of GDP for this fiscal year in the next Budget, boosted by revenue growth.

When the administration released its interim Budget in February, it estimated a budget deficit of 5.1% for the current fiscal year.

“The union government is likely to set a fiscal deficit target at 4.9-5%, lower than projected 5.1% of GDP, without compromising the capital expenditure target of Rs 11.1 lakh crore,” ICRA Chief Economist Aditi Nayar.

Upcoming Union budget likely to include International Credit Card transactions under TCS framework

Finance Minister Nirmala Sitharaman's interim budget for 2024, released in February, does not address foreign credit card transactions under the Tax Collected at Source (TCS) framework. However, the forthcoming Union Budget is planned to incorporate these transactions, bringing them in line with other payment methods under the LRS. Notably, education and health expenses overseas would continue to benefit from advantageous TCS treatment, with sums above Rs 7 lakh taxed at a fixed rate of 5%.

Conclusion
As anticipation builds for the Union Budget 2024, various stakeholders, including domestic and international forums, have laid out their expectations and recommendations. Key focuses are expected to include a stable tax environment, increased welfare spending, and a reduction in the fiscal deficit. Additionally, changes to the TCS framework are anticipated, impacting international transactions. This budget aims to balance growth initiatives with fiscal prudence, setting the stage for India's continued economic rise.