The Union Budget for the financial year 2024-25 focuses on employment, skilling, MSME and the middle class, says Finance Minister Nirmala Sitharaman.

Tabling her seventh straight budget in the Parliament today, Sitharaman announced income tax relief for the middle class, a Rs 2 lakh crore outlay for job creation schemes over the next five years, increase in capital gains tax and special allocations for Bihar and Andhra Pradesh to keep the Narendra Modi-led BJP’s new coalition partners content.

In Modi 3.0 government's first budget after the general elections, an allocation of Rs 2.66 lakh crore has been made for rural development while the spending plan on infrastructure of Rs 11.11 trillion was unchanged from the interim budget to support growth and create jobs.

The Finance Minister removed indexation benefit for property sales. Sitharaman also raised the securities transaction tax (STT) on futures and options of securities, which led to tanking of stock markets before a revival.

Income Tax

For the middle class, Sitaraman announced changes for taxpayers opting for the new tax regime, raising standard deduction to Rs 75,000 from Rs 50,000 and tweaking tax slabs. Standard deduction is a flat deduction from tax slabs for total salary earned by an employee in a year before calculating applicable income tax rate.

This will lead to taxpayers under the new tax regime saving up to Rs 17,500 in tax annually, the Finance Minister said. The new tax regime offers lower rates of taxes but permits limited deductions and exemptions.

 In the new tax regime, the tax rate structure proposed to be revised is:

(in Rs) 0-3L - Zero

3-7L - 5%

7-10L - 10%

10-12L - 15%

12-15L - 20%

15L & above -  30%

Capital gains tax

The Finance Minister announced that short term gains on listed equity shall attract a tax rate of 20%, up from 15%. On all other financial and  non-financial assets, it shall continue to attract the applicable tax rate.

The long-term capital gains on all financial and non-financial assets will be taxed at 12.5% from 10% earlier. 

The indexation benefit has also been removed on all the assets having long-term capital gains.

The budget proposes to increase the limit of exemption of capital gains on listed equity and equity oriented mutual funds to Rs 1.25 lakh per year from Rs 1 lakh currently.

Listed financial assets held for more than a year will be classified as long term. In the case of  unlisted financial assets and non-financial assets, the holding period will be for at least two years to be classified as long-term.

Unlisted bonds and debentures, debt mutual funds and market linked debentures, irrespective of holding period, however, will attract tax on capital gains at applicable rates.

F&O

Sitharaman proposed raising securities transaction tax (STT) in the futures and options (F&O) segment. 

“It is proposed to increase the rates of STT on sale of an option in securities from 0.0625% to 0.1% of the option premium, and on sale of a futures in securities from 0.0125% to 0.02% of the price at which such futures are traded," Sitharaman said in her Budget speech.

The changes come into effect from October 1.

While the hike in STT is negative for brokers and exchanges, it is set to discourage retail traders from punting household savings into derivatives trading.

Angel tax

In a bid to bolster the Indian startup eco-system and boost the entrepreneurial spirit, Sitharaman has proposed to abolish angel tax for all investor class.

The Finance Minister has also proposed to thoroughly simplify the I-T provisions for reopening and reassessment to reduce uncertainty and disputes.

"An assessment hereinafter can be reopened beyond three years from the end of the assessment year only if the escaped income is Rs 50 lakh or more, up to a maximum period of five years from the end of the assessment year,” she said.

"Even in search cases, a time limit of six years before the year of search, as against the existing time limit of ten years, is proposed. This will reduce tax-uncertainty and disputes," she added.

Customs duty

The Finance Minister has proposed cut in customs duty on mobile phones and gold. 

The proposal is to reduce the Basic Customs Duty (BCD) on mobile phones, mobile PCDA (Printed Circuit Design Assembly) and mobile charges to 15%.

Customs duty on gold and silver is to be reduced to 6% and platinum to 6.4%.

The BCD on printed circuit board assemblies on specific telecom equipment will increase to 15% from 10% currently.

Customs duty on 25 critical minerals get exemption.

Customs duty on some brood stock, shrimp, fish feed will be cut to 5%.

Employment and skilling

Sitharaman said she has made a provision of Rs 1.48 lakh crore in the budget for education, employment and skilling. This is besides an allocation of Rs 2 lakh crore provided over a five-year period for schemes and initiatives to facilitate employment, skilling and other opportunities for 4.1 crore youth. 

The government will implement three schemes for employment-linked incentives, with focus on enrolment in the EPFO (Employees’ Provident Fund Organisation) and support to first-time employees.

New hires, registered in EPFO, will receive up to Rs 15,000 in direct benefit transfers (DBT) in three instalments, with a salary cap of Rs 1 lakh per month. This initiative aims to benefit 2.1 lakh youths. 

Employers will be reimbursed up to Rs 3,000 per month for two years for each new employee. This aims to support 50 lakh new jobs.

A scheme, designed to encourage the employment of first-time employees, will offer incentives related to EPFO contributions for the initial four years of their employment. This initiative is expected to benefit 30 lakh young individuals. 

A scheme will also be introduced to offer internships to one crore youth over five years. A monthly allowance of Rs 5,000 will be provided along with a one-time assistance of Rs 6,000. It will be applicable to those who are not employed and not engaged in full-time education. Youth aged between 21 and 24 will be eligible to apply.

The top 500 firms will be encouraged to take on interns for a one-year period, with most of the cost being borne by the government and a small part by the companies from their CSR funds.

Agriculture

The budget has allocated Rs 1.52 lakh crore to agriculture and allied sectors. 

The govt will undertake comprehensive review of agricultural research to improve productivity and develop climate-resilient seeds, Sitharaman announced.

In the next two years, one crore farmers will be initiated in natural farming.

Bihar and AP

Keeping the coalition partners TDP (Telugu Desam Party) and JDU (Janata Dal United) happy, the Finance Minister has announced special packages for the development of Bihar and Andhra Pradesh.

While Bihar has got major infrastructure projects, Andhra Pradesh has received significant financial aid.

For Bihar, the Finance Minister announced spending of Rs 60,000 crore on infrastructure projects like expressways, power plant, heritage corridors and new airports. This will include funding of Rs 26,000 crore for highways.

Sitharaman said the government will arrange financial assistance to Bihar through aid from multilateral development banks.

The central government will also provide ₹ 15,000 crore in financial assistance for Andhra Pradesh for the purpose of developing Amaravati, Union Finance Minister Nirmala Sitharaman said.

For Andhra Pradesh, the budget has allocated Rs 15,000 crore in financial aid through multilateral agencies. Additional amounts will be earmarked in future years to support the Pollavaram irrigation project and other capital investments for economic growth.

"Our government has made concerted efforts to fulfil the commitments in the Andhra Pradesh Reorganisation Act. We are recognising the state's need for capital. We will facilitate special financial support through multilateral development agencies. In the current financial year, Rs 15,000 crore will be arranged with additional amounts in future years," Sitharaman said.

MSMEs

Sitharaman said that for facilitating term loans to MSMEs (micro, small and medium enterprises) to purchase machinery and equipment without collateral or third party guarantee, a credit guarantee scheme will be introduced. The scheme will operate on pooling of credit risks of such MSMEs.

A guarantee fund of up to Rs 100 crore will be introduced to support credit guarantees for MSMEs in the manufacturing sector. 

Sitharaman also said that SIDBI will open 24 new branches to serve MSME clusters.

Sitharaman has doubled the limit of Mudra loans to Rs 20 lakh from Rs 10 lakh for MSME credit.

Pradhan Mantri Mudra Yojana was launched in 2015 to provide loans up to Rs 10 lakh to small and micro enterprises from commercial banks, small finance banks and non-banking financial companies (NBFCs). 

IBC

An integrated tech platform will be set up to improve outcomes under the Insolvency and Bankruptcy Code (IBC), aiming for greater consistency, transparency and better oversight for all stakeholders. 

The IBC has resolved over 1,000 companies, resulting in a direct recovery of Rs 3.3 lakh crore to creditors. Additionally, 28,000 cases have been disposed of, involving over Rs 10 lakh crore before admission.

Education loans

The government will provide financial support for loans up to Rs 10 lakh for higher education in domestic institutions.

“E-vouchers for loans up to Rs 10 lakh for higher education in domestic institutions will be provided to 1 lakh students each year. These vouchers will cover an annual interest subsidy of 3% on the loan amount,” said Sitharaman.

Affordable housing

The government will invest Rs 10 lakh crore to address the housing needs of 1 crore urban poor and middle-class families. This will include the central assistance of Rs 2.2 lakh crore in the next 5 years. A provision of interest subsidy to facilitate loans at affordable rates is also envisaged.

The government plans to build three crore affordable homes over the next five years in urban and rural areas.  

The affordable housing segment refers to those houses priced under Rs 40 lakh. 

The PM Surya Ghar Muft Bijli Yojana will install rooftop solar panels for one crore households.

Nuclear and space

The government proposes to set up a Rs 1,000 crore venture capital fund for expanding the space sector. Sitaraman said there will be a continued emphasis on expanding the space economy by five times over the next 10 years. 

 The government plans to partner with the private sector to set up Bharat Small Reactors and conduct research and development on small modular reactors and newer technologies for nuclear energy. 

Fiscal deficit

Buoyed by robust tax collections and a higher-than-expected dividend receipt from the Reserve Bank of India (RBI), Sitharaman said the government's fiscal deficit will be trimmed to 4.9% of the GDP in 2024-25, from the estimate of 5.1% in the interim budget she presented in February. Fiscal deficit is the difference between the total revenue earned and total expenditure incurred.

The Finance Minister aims to reach a fiscal deficit of below 4.5% by FY26.

Market borrowing is expected to decrease marginally to Rs 14.01 lakh crore in FY25 from Rs 15.43 lakh crore a year ago. 

Receipts for FY25 are seen at Rs 32.07 lakh crore and expenditure at Rs 48.21 lakh crore.