How will Budget 2024 Affect your Finances?
Created on 13 Jan 2024
Wraps up in 7 Min
Read by 1k people
Updated on 10 Feb 2024
The countdown for the announcement of the Union Budget for 2024-25 has begun. 1 February 2024 will be the day when Finance Minister Nirmala Sitharaman will unveil India's next financial chapter.
Although the final allocations will depend on various economic factors and priorities, all of us have certain expectations for the next fiscal year.
Now that PM Narendra Modi has called the next 25 years the "Amrit Kaal" of the nation, expectations for the upcoming Budget season are sky-high. ⬆️
(I really hope that the benefits for common people like you and I don't get lost in the clouds, like the last budget. cough, cough... 😅)
While you wait for the official announcement in February, we will take a peek into what developments could be a part of this year’s budget.
What Could Budget 2024-25 Bring for Taxpayers?
665 lakh! That’s how many Indians pay tax annually. This number, up to 4.8% of the total population, pays personal income tax. Now, these 665 lakh people make up about 76% of the government's total personal income tax receipts.
Are you among this number? Spill the beans, reader! 💸
The existing central government will submit its last interim budget this year. This could lead to two different scenarios. ✌️
One is where the government could announce profitable schemes or hikes to entice better votes, and the other would be as a result of the recent win in multiple states; the government may be unlikely to stir any kind of trouble and not make any big announcements at all.
The fate of around 86 million salaried people in the nation hangs by a thread based on what the finance department has decided.
Let’s see what expectations are likely to be met in this budget season:
a. Revision of income tax slabs:
Sadly, there has been no change in income tax rates under the old tax regime ever since 2014. Sure, a new tax regime came into existence, but it has its limitations, which we will discuss in the next pointer.
This has caused a burden on individuals who had to pay a large amount of tax every year despite fluctuations in inflation. Hence, people working 9 to 5 or 10 to 6 jobs would be more than happy to see a change on that front.
The government might adjust the income tax slabs for inflation and offer some relief to taxpayers. There might be calls for increasing the highest tax bracket to raise revenue or proposing a revised structure considering income levels.
b. Changes in New Tax Regime:
Over 63% of tax-paying citizens still prefer the old tax regime even after 3 years of the new regime’s introduction. This preference is high among taxpayers with a salary above ₹7.5 lakh per annum.
This inclination is due to the deductions the old tax regime provided under Sections 80C, 80D, and more. Numerous deductions significantly decrease taxable income and, subsequently, tax liability.
The new regime, however, simplifies the process by eliminating most deductions but offering lower tax rates. This leads to more tax for long-term investments, making people lean more towards the old regime.
Hence, further development in the new tax regime is expected this session.
Which tax regime are you on? Read the article New tax regime vs Old tax regime: Which Suits You More? to get detailed information.
c. Standard deduction:
Salaried individuals would welcome an increase in the standard deduction limit (currently ₹50,000) as it reduces taxable income. For those unaware, the standard deduction is a handy tax break that salaried individuals get when filing an Income Tax Return (ITR).
This speculation is one of the most talked-about discussions, and salaried individuals have a big chance of seeing a change in this direction.
Now, let’s see which sectors are the most likely to see changes in this budget session.
Sector-Wise Expectation for Budget 2024-25
The central government is planning to increase the capital expenditure by 20%. They plan on doing so by declaring a fiscal deficit target of 5.3% of Gross Domestic Product (GDP). This would be a reduction from last year’s target of 5.9%.
This change would directly affect the funding provided to the various sectors in India.
Real Estate Sector
In the real estate sector, basic demands like increasing allocation for development across roads, railways, ports, and airports or promoting sustainable infrastructure projects like renewable energy are common feats.
Other than that, here is a detailed analysis of the announcements we may see in Budget 2024-25:
a. More Power to Dream Homes:
There is a possibility of a rise in home loan interest rate from ₹2 lakh to somewhere near ₹5 lakh. This would boost the home sales, which is around 20% post-pandemic.
The pandemic brought a steep decline in the real estate sector, affecting affordable housing, new construction projects, and increased tax obligations. The affordable housing segment needs a boost, and the government can hold the hammer by offering tax breaks, budget funding, and policies that get more families on the property ladder.
b. Official “Industry” Status:
The real estate sector contributes 8% to India’s GDP and has thus boosted the economy. Despite the significant contribution, real estate is not recognised as an official “industry” in India. 😲
So, what does this mean? Lack of industry status prevents the real estate industry from gaining single window clearance, tax breaks, and GST rationalisation in the budget. This, in turn, hinders the many possibilities the sector could cash on with the rapidly increasing market.
Hence, posting a stamp to make the real estate sector an industry would work wonders, some of which are new jobs, a rise in advanced infrastructure and more capital generation.
Every year, the healthcare sector reveals a big wishlist involving certain developments in the most crucial areas:
- Upgrading hospitals,
- increasing bed capacity,
- strengthening rural healthcare,
- boosting funding for medical research,
- development of affordable healthcare solutions, etc.
Apart from this, here are a few areas which may get special attention in the upcoming budget.
a. Hike in Health Spending:
This sector strongly demands an increase in health spending from 1.6-1.8 to 2.5% of GDP. This rise would augment social insurance schemes, boost healthcare reforms and infrastructure, and fast-track digital health services across India.
b. Reduction in GST:
Along with this, a GST rationalisation is also ranked top on the list as charging 12% GST for primary & tertiary care services and 18-28% GST for critical devices and treatments increase capital costs, making health services too expensive.
Making India the world's manufacturing powerhouse has been a self-proclaimed dream of the now-existing central government. Many schemes like the Production Linked Incentive (PLI) have been brought forth to boost the manufacturing of more and more products and key components in the nation.
Seeing the constant change in India's manufacturing output, in terms of GDP, reveals a not-so-bright picture of the nation’s manufacturing sector. This also proves that the government is making efforts, and there is room for vast developments down the road.
The decline in production from 2022 to 2023 from the above graph is a testament to the gap we discussed earlier. For this, the following areas need to be focused on:
- Expanding PLI schemes to attract investments in specific sectors like electronics, pharmaceuticals, and textiles.
- Streamlining regulations and simplifying processes for starting and running businesses.
- Encourage the adoption of automation and digital technologies by MSMEs.
- Streamline access to loans and promote alternative financing options for MSMEs.
The Bottom Line
Various other sectors and industries in India await announcements of improvements in either tax rates or schemes. Renewable energy sector, education sector, finance sector, etc. are many of a few.
It would be interesting to see which change in the Budget 2024-25 would make headlines, nonetheless changing lives (for better or worse). Stay tuned to Insider, as we will cover the most life-changing aspects of this budget season.
You can also comment below and let us know which sector you want us to focus on. Hurry, budget season is almost upon us! ⏲️
*Disclaimer: The stocks, companies, and predictions discussed above aren't a recommendation from Insider by Finology and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making investment decisions.
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