While laying a solid foundation for sustainable business growth, the Union Budget leaves many gaps on income tax, ease of business for startups and red-tapism.
Finance Minister Nirmala Sitharaman’s Union Budget 2024-25 is a game-changer for the business community in India. With a focus on tax reforms, credit support, infrastructure development, and innovation, this budget lays a solid foundation for sustainable business growth. Here’s how this budget will benefit and where it could have done better for businessmen across the country.
- Comprehensive Tax Reforms:
The abolition of the Angel Tax for all classes of investors is a huge relief for the startup ecosystem. By removing this tax burden, the government encourages more investments in new ventures, which is fantastic news for entrepreneurs.
Reducing the corporate tax rate for foreign companies from 40% to 35% will make India more attractive to global investors, boosting foreign direct investment (FDI). The new income tax regime introduces a simplified structure, making financial planning easier for businessmen. The new tax slabs are:
– 0-3 lakh rupees – Nil
– 3-7 lakh rupees – 5%
– 7-10 lakh rupees – 10%
– 10-12 lakh rupees – 15%
– 12-15 lakh rupees – 20%
– Above 15 lakh rupees – 30%
However, the budget could have done more to simplify the tax compliance process. A more streamlined and user-friendly tax filing system would further ease the burden on businesses, especially small and medium enterprises (SMEs).
- Enhanced Support for MSMEs:
MSMEs are the backbone of India’s economy. Recognizing this, the budget has doubled the Mudra loan limit from Rs 10 lakh to Rs 20 lakh. This increase will provide much-needed liquidity, helping small businesses to grow and expand.
Additionally, new mechanisms to facilitate the continuation of bank credit to MSMEs during stress periods have been introduced. This ensures that businesses can overcome economic challenges without facing a liquidity crunch.
However, while increasing the Mudra loan limit is commendable, there needs to be more focus on reducing the non-performing assets (NPA) in this sector. Enhanced monitoring and support mechanisms to ensure these loans are utilized effectively would prevent future financial stress.
- Massive Infrastructure Investments:
The budget’s allocation of Rs 11,11,111 crore for infrastructure development, which is 3.4% of GDP, shows the government’s commitment to improving logistics and reducing business costs. Key projects include Phase IV of the Pradhan Mantri Gram Sadak Yojana, providing all-weather connectivity to 25,000 rural habitations. This opens up new markets and opportunities for businesses in these areas.
While the allocation is significant, the challenge lies in timely and effective implementation. Delays and inefficiencies in project execution can undermine these investments. The government must ensure that these projects are completed on time and within budget to truly benefit businesses.
- Boosting Innovation and Research:
Staying competitive globally requires continuous innovation. The budget proposes the establishment of the Anusandhan National Research Fund with a Rs 1 lakh crore financing pool to spur private sector-driven research and innovation. Additionally, a Rs 1,000 crore venture capital fund will expand the space economy, expected to grow fivefold over the next decade. These initiatives will provide businesses with the financial support needed to invest in cutting-edge technologies.
While these initiatives are promising, the government should also focus on improving the ease of doing business for startups. Simplified regulations, faster approvals, and better access to funding would significantly enhance the innovation landscape.
- Rationalization of Customs Duties:
To reduce input costs for businesses, the government has rationalized customs duties. Significant reductions include:
– Basic customs duty on mobile phones, PCBA, and chargers reduced to 15%
– Customs duties on gold and silver reduced to 6%
– Full removal of customs duties on three additional cancer treatment medicines
These adjustments will lower manufacturing costs and enhance profitability. However, more could be done to simplify customs procedures and reduce bureaucratic hurdles that often delay the import and export processes.
- Employment and Skilling Initiatives:
The budget introduces three key schemes under the Prime Minister’s Package to boost employment and skilling:
– **Scheme A (First Timers):** Direct benefit transfer of 1-month salary in 3 installments up to Rs 15,000 for first-time employees registered in EPFO
– **Scheme B (Job Creation in Manufacturing):** Incentives for both employee and employer EPFO contributions during the first four years of employment
– **Scheme C (Support to Employers):** Reimbursement to employers up to Rs 3,000 per month for 2 years towards EPFO contributions for each additional employee
These initiatives are expected to create millions of jobs, providing businesses with a skilled workforce and reducing training costs. However, the government must ensure that these programs are implemented effectively, with minimal red tape and bureaucracy.
- Energy Security and Sustainability:
The PM Surya Ghar Muft Bijli Yojana, with over 1.28 crore registrations, aims to promote renewable energy adoption. The introduction of a Pumped Storage Policy for electricity storage and a joint venture between NTPC and BHEL to set up an 800 MW commercial thermal plant using AUSC technology are steps towards ensuring a stable and sustainable energy supply for businesses.
While these initiatives are commendable, the government should also focus on creating more incentives for businesses to adopt green technologies and practices.
Conclusion:
The Union Budget 2024-25 is a forward-thinking policy framework that addresses the critical needs of businesses through tax reliefs, enhanced credit support, massive infrastructure investments, and a strong focus on innovation. By creating a more supportive environment for startups, MSMEs, and large enterprises, this budget lays a solid foundation for robust economic growth. However, effective implementation and further simplification of regulations are crucial for these measures to truly benefit businesses. As India continues to evolve into a global economic powerhouse, these measures will empower businesses to thrive, innovate, and contribute significantly to the nation’s economic success. (The author is a business content creator)
