The first budget of the Narendra Modi-led NDA government 3.0 presented on Tuesday raised spending to generate more jobs and spur economic growth while looking to soothe key coalition partners following a wake-up call from voters in the April-June Lok Sabha elections.
In her budget speech, finance minister Nirmala Sitharaman listed nine priority areas for the government: productivity and resilience in agriculture, employment and skilling, inclusive human resource development and social justice, manufacturing and services, urban development, energy security, infrastructure, innovation, research and development and next-generation reforms.
“In this budget, we particularly focus on employment, skilling, small businesses, and the middle class,” she said.
Despite the new spending, India cut its fiscal deficit target to 4.9% of gross domestic product in the fiscal year ending on March 31, 2025, from 5.1% in February’s pre-election interim budget.
India’s inflation rate is stable and moving toward the government’s 4% target, the minister said, while the economy grew at a sizzling 8.2% rate in the last fiscal year.
“This visionary budget will uplift and empower every stratum of our society, paving the way for a brighter future for all,” Prime Minister Narendra Modi said in televised remarks.
Tax tinkering
There was some good news for taxpayers opting for the new regime with the standard deduction increased from Rs 50,000 to Rs 75,000.
Sitharaman also revised tax slabs under the new regime. Annual income up to Rs 3 lakh will now attract zero tax, while income in the Rs 3 lakh-Rs 7 lakh bracket will be taxed at 5 per cent. The rate will be 10 per cent for income between Rs 7 lakh and Rs 10 lakh, 15 per cent for Rs 10 lakh to Rs 12 lakh, and 20 per cent for Rs 12 lakh to Rs 15 lakh. Annual income over Rs 15 lakh will attract 30 per cent tax.
The finance minister said that salaried employees can save up to Rs 17,500 in income tax under the new slabs. However, she left the old tax regime untouched.
Sitharaman increased tax on short-term capital gains to 20 per cent and long-term capital gains to 12.5 per cent.
In a bid to cool down the euphoria in Futures and Options (F&O) trading, the government increased security transaction tax (STT) on it to 0.02 per cent and 0.1 per cent. Further, income received on the buyback of shares will be taxed in the hands of the recipient.
The finance minister abolished the controversial angel tax on all classes of assets. Startup and venture funds, and even some opposition leaders, have cheered this budget decision, terming it a “game-changer”.
Angel tax refers to the tax that the government imposes on funding raised by unlisted companies, or startups if their valuation exceeds the company’s fair market value.
Booster jab for jobs
In her seventh budget speech, spanning 1 hour and 40 minutes, Sitharaman had a big announcement for professionals entering the workforce: under Scheme A, the Centre will give one month’s salary to those joining their first job. This amount will be provided as a Provident Fund contribution. The move, she said, will benefit 2.10 crore youngsters.
Scheme B, which focuses on job creation in manufacturing, will provide incentives to both employees and employers for the first four years of employment under EPFO guidelines. It is expected to benefit 30 lakh youth and will cover additional employment across all sectors.
Scheme C will support employees with additional employment in all sectors by reimbursing employers up to Rs 3,000 per month for two years for each additional employee’s EPFO contributions. The scheme aims to incentivise the employment of 50 lakh additional people.
The government will also provide financial support for loans up to Rs 10 lakh for higher education in domestic institutions. Sitharaman said e-vouchers for this purpose will be given directly to one lakh students every year with interest subvention of 3 per cent of the loan amount.
Mudra lift for MSME sector
Micro, Small, and Medium Enterprises (MSMEs) will now be able to avail of loans of up to Rs 20 lakh instead of the current Rs 10 lakh under the Mudra scheme, Sitharaman said. This is also applicable to those who have successfully repaid loans previously taken under the Tarun category. The scheme was launched on April 8, 2015, by Prime Minister Narendra Modi to facilitate easy collateral-free micro-credit of up to Rs 10 lakh to non-corporate, non-farm small, and micro-entrepreneurs for income-generating activities.
The finance minister further said that credit availability for MSMEs during their stressed period will be provided from the government-promoted fund.
The turnover threshold of buyers for mandatory onboarding on the TReDS platform will be slashed from Rs 500 crore to Rs 250 crore, she added. The budget also has provisions for financially supporting 50 multi-product irradiation units in the MSME sector.
Rural rundown
The government has made a provision of Rs 2.66 lakh crore for rural development that will include rural infrastructure projects as well, the finance minister said. She also said three crore additional houses will be constructed under the PM Awas Yojana (PMAY) in rural and urban areas.
The minister also announced the launch of phase-4 of the Pradhan Mantri Gram Sadak Yojana (PMGSY), to provide all-weather connectivity to 25,000 rural habitations.
The government increased the allocation for its flagship Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) for 2024-25 to match the revised estimate of Rs 86,000 crore. The scheme has been allocated Rs 60,000 crore for FY24 and the revised estimate was pegged at Rs 86,000 crore.
Sops for Bihar, Andhra Pradesh
Sitharaman has made big announcements for Bihar and Andhra Pradesh, the two states ruled by Bharatiya Janata Party (BJP) allies Janata Dal (United) and Telugu Desam Party.
It includes Rs 26,000 crore for highways and Rs 11,500 crore for flood mitigation for Bihar, and Rs 15,000 crore to develop the capital of Andhra Pradesh.
‘Duty’ calls
Sitharaman reduced customs duty on a range of products, including gold, silver, critical minerals, mobile phones, and other electronic items, to cut input costs, increase value addition, promote export competitiveness, and boost domestic manufacturing.
The duty on shea nuts, marine sector goods such as prawn and shrimp feed, and fish feed, inputs for the manufacture of these feeds like lipid oil, cancer drugs, other precious metals like silver and platinum, textile, steel, copper, capital goods, shipping, medical equipment, and leather sector items has also been reduced.
The basic customs duty on coins of precious metals, gold/silver findings, and gold and silver bars has been reduced to 6 per cent from 15 per cent. It has been cut to 5.35 per cent from 14.35 per cent for gold and silver ore.
On platinum, palladium, osmium, ruthenium, and iridium, the levy has been cut to 6.4 per cent from 15.4 per cent.
(With agency inputs)
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