Key highlights of Interim Budget 2024-25

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Key highlights of Interim Budget 2024-25

Tejasvi

@tejasvi

February 1, 2024

Public Policy

108

The finance minister presented the Interim Budget 2024 today. The Interim Budget of 2024 has established a vision for a technology-driven and knowledge-centric nation by 2047. The government’s emphasis on DeepTech, technology-enabled development to benefit the last mile, fostering innovation Research & Development (R&D) and transformational reforms to skill, reskill and upskill India’s youth reflects the country’s commitment towards inclusive and sustained development for all. Following the customary practice in interim budgets, no changes have been announced by the government in the taxation regime or government schemes.

Key highlights of interim budget 2024 are as follows:

Continued focus on growth and achievements of the last decade such as infrastructure developments, digital inclusion, tax reforms, avenues for accessing global capital, inflation management, etc.
Fiscal deficit for financial year 2025 is expected to narrow down to 5.1% from the revised 5.8% for 2024.
Research and Innovation

Proposal to provide a corpus of INR 1 lakh crores with 50-year interest free loan – The corpus will provide long-term financing or refinancing with low or nil interest rates to scale up research and innovation in sunrise domains.
Proposal to introduce a new scheme for strengthening deep-tech technologies for defence purposes.

Impact: India has more than 3000 deeptech startups growing at a staggering 53% CAGR over the last 10 years. The key to this phenomenal growth can be attributed to the exponential rise in emerging technologies and their accelerated adoption across sectors. It is welcoming to see government’s focus on promoting deep technologies in critical sectors such as defence. Overall investment into R&D activities is likely to have a significant impact on the deep tech startup ecosystem. This is likely to address issues being faced by such startups in terms of access to long term capital. We will analyse these schemes once more details are available.

Startups and Micro, Small and Medium Enterprises (MSMEs):

Sunset date for incorporation to qualify as eligible startup under S. 80-IAC of Income Tax Act, 1961 (IT Act) has been extended to March 31, 2025. This will ensure continuity of S. 80-IAC exemption for eligible start-ups (where start-ups can claim tax exemption for 3 consecutive years out of first 10 years of their incorporation) for another one year.
Orienting regulatory environment to facilitate growth of MSMSEs by ensuring timely and adequate finances, relevant technologies and appropriate training. The budget speech is silent on policy announcements on credit access, technology adoption or any other aspect which would have propelled further growth for MSMEs in India. This could be a missed opportunity for MSMEs that play a vital role in India’s GDP growth.

Green energy

Proposal to expand and strengthen the e-vehicle ecosystem by supporting manufacturing and charging infrastructure. Greater adoption of e-buses for public transport networks will be encouraged through payment security mechanism.
Proposal to provide viability gap funding for harnessing offshore wind energy potential for initial capacity of 1 giga-watt.
Proposal to set up coal gasification and liquefaction capacity of 100 MT by 2030

Impact: This is a welcome announcement and is evident of India’s commitment towards achieving net zero goals and energy transition. This will play a crucial role in diversifying India's renewable energy portfolio and reducing reliance on fossil fuels.

Corporate tax:

No change in corporate tax rates;
Sunset date for investment by Sovereign wealth fund under S. 10(23FE) of IT Act to qualify for exemption in relation to dividend, interest, long term capital gains etc. extended till March 31, 2025;
Proposal to withdraw outstanding direct tax demands up to INR 25,000 pertaining to the period up to FY 2009-10 and up to INR 10,000 for FY 2010-11 to 2014-15 (no corresponding amendment in the Income-tax Act, 1961). This will relief to taxpayers from long pending tax litigations.
Extension of timeline till March 31, 2025, to notify faceless regime for transfer pricing assessment, proceedings before Dispute Resolution Panel and Income Tax Appellate Tribunal (ITAT);
Changes in rates of Tax Collection at Source (TCS) on payments made under Liberalised Remittance Scheme (LRS) and overseas tour package vide press release dated 28^th June 2023 have now been incorporated under S. 206C(1G) of IT Act. Revised rates of TCS on LRS are as provided below for reference:

Nature of payment	Rate w.e.f October 1, 2023
LRS for education financed by loan from financial institution	Nil up to INR 7 lakh 0.5% above INR 7 lakh
LRS for medical treatment/ education (other than financed by loan)	Nil up to INR 7 lakh 5% above INR 7 lakh
LRS for other purposes	Nil up to INR 7 lakh 20% above INR 7 lakh
Purchase of overseas tour program package	5% till INR 7 lakh

Goods and Services Tax (GST):

Provisions relating to Input Service Distributor (ISD) have been made mandatory basis decisions taking in 50th and 52nd GST Council meetings held in 2023.

A taxpayer who is receiving common inputs services is proposed to be made liable to take ISD registration in order to distribute common credits to its branch office within the same PAN.
The definition of “ISD” as per S. 2(61) of Central Goods and Services Tax, 2017 (CGST Act) has been amended to include reverse charge invoices within its ambit.
The manner of distribution of common credits which was stated in S. 20 of CGST Act is proposed to be deleted. These are now expected to be provided under CGST Rules.

Impact: In the past, there was lot of uncertainty in terms of which mechanism to be used by companies for distribution of common credits (i.e., ISD or self-supply mechanism). With inclusion of this proposal in finance bill, the government has formalised the amendments introduced in 50^th and 52^nd GST council meeting.

We hope you will find the update useful. Please write to tejasvi@nasscom.in in case you need any clarifications.

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Tejasvi

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