Interim Budget 2024: Key Expectations and Possible Announcements
Previewing Budget 2024: As India gears up for the Interim Budget 2024 on February 1, Finance Minister Nirmala Sitharaman is set to present a financial roadmap that will guide the government’s revenue and expenditure until a new administration takes charge after the upcoming elections. Unlike a full-fledged budget, this interim version is expected to focus on continuity rather than introducing major policy overhauls.
Limited Scope for Major Announcements
Since this is a temporary financial plan, no big-ticket announcements or sweeping reforms are expected. However, the government may still make adjustments to address key economic challenges while maintaining stability.
Potential Tax Adjustments for Individuals
With steady economic growth despite inflationary concerns, there is scope for some tax relief measures. While existing tax rates are relatively low, there has been growing concern over the 25 percent tax slab for higher-income groups. There is speculation that the government might introduce a ceiling rate to streamline taxation and provide relief to individual taxpayers.
Extending Tax Benefits for Manufacturing
To bolster the Make in India initiative, the government is likely to extend the 15 percent concessional tax rate for new manufacturing units beyond March 2024. This move would encourage industrial expansion and foreign investments in the sector.
Changes in Investment-Linked Deductions
A significant shift in tax policy has been the gradual phasing out of investment-linked deductions. The current cap of Rs 1.5 lakh on tax-exempt investments appears inadequate in light of rising incomes and inflation. The government may consider higher exemption limits for investments in mutual funds, Unit Linked Insurance Plans (ULIPs), and exchange-traded funds (ETFs). Additionally, increasing tax credit limits on health insurance premiums could be on the agenda to ease the financial burden of rising healthcare costs.
Boosting Infrastructure Funding
With large-scale infrastructure projects underway, the government may increase public funding to accelerate development. One anticipated move is a revision of the investment limit in National Highways Authority of India (NHAI) bonds, currently capped at Rs 50 lakh. Raising this limit to Rs 75 lakh or Rs 1 crore would incentivize private investments in infrastructure and align with the broader economic growth strategy.
Support for Homebuyers
First-time homebuyers could receive relief on home loan interest rates, as the Rs 2 lakh deduction cap on interest payments for self-occupied homes is under review. Raising this limit would ease financial pressure on homebuyers and promote real estate investment.
No Major Changes in Capital Gains Tax
Investors are closely watching whether the government will tweak the securities transaction tax (STT) or long-term capital gains (LTCG) tax on listed shares. Given the potential impact on market sentiment, the government may choose to keep these tax structures unchanged in this interim budget.
Strategic Positioning Ahead of Elections
With elections around the corner, the government’s approach to this budget will be under scrutiny. While major tax reforms may be reserved for the full-fledged Union Budget later in the year, the strategic decisions taken now will shape investor confidence and economic direction.
As the countdown to the Interim Previewing Budget 2024 begins, all eyes are on the Finance Minister’s announcements. Whether it brings small tax reliefs, sectoral boosts, or simply maintains economic stability, the budget will play a crucial role in India’s financial trajectory in the coming months.
