Interim Budget 2024

The Indian Finance Minister (“FM”) announced the interim Budget for the year 2024 (“Budget”). Since it’s the election year, the full budget will be presented after the completion of the elections. The Budget focuses on inclusive development and growth and proposes to take measures for women, farmers, youth, environment, and investment into India from foreign countries. On the tax side, while the tax rates remain unchanged for for direct and indirect taxes including import duties, some of the changes that have been proposed are as follows:

• The FM has proposed withdrawal of outstanding tax demands of up to INR 25,000 up to financial year 2009 – 10 and up to INR 10,000 for FY 2010 – 11 to 2014 – 15. This is expected to benefit about a crore of taxpayers.

• The sunset clause for income tax deduction under Section 80-IAC of the Income Tax Act, 1961 has been extended to startups incorporated up to March 31, 2025. However, benefit of reduced corporate tax rate for certain manufacturing companies which expires on March 31, 2024 has not been extended.

• Extension of sunset clause on benefits for: (i) commencement of operations by investment division of offshore banking unit located in IFSC, and (ii) making of investment by notified sovereign wealth funds or foreign pension funds, to 31 March 2025.

• Amendments of provisions relation to TCS on LRS have been proposed in line with the government’s press release of June 2023.

• The Input Service Distribution (ISD) mechanism has been mandated prospectively from a date to be notified by the central government. The conditions and restrictions for this are yet to be prescribed.

Some of the key developments on the policy side include:

• Adoption of economic policies that foster and sustain growth, facilitate inclusive and sustainable development, improve productivity, create opportunities for all, help them enhance their capabilities, and contribute to generation of resources to power investments and fulfil aspirations.

• District programs, development programmes for Eastern India, rooftop solarisation, housing for middle class, set up of medical colleges, maternal and child care including encouraging cervical cancel vaccination, appears to be top priorities of the government as they move forwards toward inclusive development and growth.

• A corpus of rupees one lakh crore to be established with 50 year interest free loan for techsavvy youth. Mechanics of these boosters will be critical.

• Capex for infrastructure development has been increased to INR 11.1 lac crore up by 11.1%.

• Thee major economic railway corridor programs proposed to be implemented: (1) energy,

mineral and cement corridors, (2) port connectivity corridors, and (3) high traffic density corridors.

• On the environment side, the FM has proposed the following:

o Important measures such as gap funding for harnessing offshore wind energy, coal gasification and liquefaction and blending of compressed biogas in compressed natural gas to be undertaken to meet commitment of ‘net zero’ by the year 2070.

o Support to e-vehicles ecosystem to be extended by supporting manufacturing and charging infrastructure.

o New scheme of bio-manufacturing and bio-foundry proposed to be launched for promotion of green growth.

o Scheme for restoration and adaptation measures, and coastal aquaculture and mariculture with integrated and multi-sectoral approach to be launched for promoting climate resilient activities for blue economy 2.0.

• The FM has indicated that the government is negotiating bilateral investment treaties (BITs) with foreign partners for encouraging sustained foreign investment. It may be noted that pursuant to the Vodafone indirect transfer issue, the Government had unilaterally sent notices to terminate BITs with 58 countries, including 22 EU countries.

• The recently announced India – Middle East – Europe Economic Corridor will become an economic game changer for India and other countries.

• Fiscal deficit for the next financial year has been estimated at 5.1% of GDP. This is in line with the Governments objective of reducing the fiscal deficit to below 4.5% by 2025-26.