A balanced budget; serves as a roadmap for India to reach $5 trillion economy before the end of the decade

Interim Budget 2024 showcased India’s fiscal prudence coupled with revenue mobilisation and capital expenditure, which puts confidence in the economy’s green shoots as the country marches towards becoming ‘Viksit Bharat’ by 2047. Image: Shutterstock 
 
The interim Budget 2024 before the general elections is here gave a sneak peek into the government’s economic playbook, which is focused on stability, progress and innovation. It also showcased India’s fiscal prudence coupled with revenue mobilisation and capital expenditure, which puts confidence in the economy’s green shoots as the country marches towards becoming ‘Viksit Bharat’ by 2047. In the tradition of continuity, Finance Minister Nirmala Sitharaman maintained status quo on the direct and indirect tax rates and resisted populist tax proposals, however, some announcements made will aid the ongoing momentum of investment flow into the country.
 

The sunset date for tax benefits for startups, investment by Sovereign Wealth and Pension funds and some IFSC units related to aircraft leasing has been extended by one year to 31 March 2025 resulting in a significant boost for the industry. Underlining the commitment to ease of doing business and living and improving taxpayer services, the Finance Minister announced withdrawal of outstanding tax demands of past years for taxpayers in the limit of Rs25,000 up to 2009-10 and Rs10,000 from 2010-11 to 2014-15, a  move that is expected to benefit about 10 million taxpayers.
 
While it was not expected that the interim Budget would render significant iterations in the tax structure, some expected announcements given their relevance and pertinence to the current economic landscape were missing.
 
Extension of the sunset date for new manufacturing companies from March 31, 2024 to March 31, 2025 for availing the concessional tax rate of 15 percent was conspicuously missing in the budget proposals, given the government’s impetus towards ‘Atmanirbhar Bharat’ and Make in India. While the Budget indicates an increased allocation on the Profit Linked Incentive (PLI) scheme (scheme for incentives incremental sales in certain sectors), announcements on extending the scheme to job creating and promising sectors like garments, leather, jewelry, space tech startups, etc. were absent.

Also read: Interim Budget 2024: Reimagining, one more time
 
Another anticipated announcement was regarding the Indian government's roadmap for adopting BEPS Pillar 2, aligning with international tax developments. This global initiative aims to establish a minimum global tax rate, and several countries have already incorporated Pillar 2 provisions domestically. Given that India has been an active proponent and contributor to global discussions, various jurisdictions and large multinational groups are eagerly awaiting India’s indication on adoption and timelines of these provisions in its domestic regime.
 
In her shortest Budget speech ever, the finance minister presented a balanced Budget that serves as a roadmap for India to reach $5 trillion economy before the end of the decade. As India charts its path towards becoming the 3rd largest economy, here’s hoping that the interim Budget lays the ground for the full budget to follow through on some of the sought-after measures by the industry.
 
(Naveen Aggarwal is partner, tax at KPMG in India)