On February 1, 2024, Nirmala Sitharaman, the Finance Minister, will lay out the new budget for the Modi government. Let's not forget, since the temporary budget of 2019, Sitharaman's upcoming budget counts as the sixth, except for the one by Velocita Ramen.
Before diving into key changes and highlights of past budgets, it's vital to acknowledge the important part played by personal income tax rates. They often become the top consideration in budget talks, especially when it concerns broader insights and updates on budget matters.
In 2019, the government made a big change. They decided to change the tax system. The idea was to help regular people by making income tax rates lower. They also changed the tax brackets. The main purpose? To make taxes less hard on people and simplify the confusing stuff in the income tax rules.
With this plan, they made personal tax paying easier. They lowered tax rates for people with key exemptions and deductions. This was all about making taxes simpler for everybody. In the budgets of 2023 and 2024, they even tweaked tax brackets again. This reinforced the new format as the norm. However, people were given a choice. They could use the new or the old system. Now, here's how the new tax rules look:
1. Income up to three lakh rupees? No tax needed
2. Bring in over three lakh but under five lakh? You're looking at a 5% tax rate
3. Earn more than six lakh but less than nine lakh? Watch out for a 10% income tax
4. If your income is somewhere between 12 lakh and 50 lakh, there's a 20% income tax rate
5. Earning more than 50 lakh? Prepare for a 30% income tax burden
The updated setup targets giving people a straightforward, step-by-step tax system. It empowers taxpayers to pick the best choice for their money situation.
Today, taxpayers are constantly looking for new exclusions and strategies to reduce their income tax bills. The Modi government planned to promote more engagement in the banking sector in its first post-2014 budget, encouraging consumers to deposit their savings and earnings in financial institutions. As part of this endeavor, the annual investment limit under Section ATC was increased dramatically, from 50,000 to 1.5 lakh rupees.
Individuals can use it to lower their taxable income by making tax-saving investments or incurring qualified expenses. This change in the investment limit aimed to give taxpayers more alternatives for savings and investment, in line with the government's goal of encouraging a culture of financial inclusion and careful spending; prudent saving practices within the banking framework. These encompass investments in provident funds, payments directed towards insurance premiums, and participation in equity-linked saving schemes. There's a growing anticipation that the 2024 budget might elevate this limit to approximately two lakh rupees or potentially expand the range of instruments eligible for these exemptions, including considerations related to the principal sum on home loans.
The spotlight moved to indirect tax when a huge change happened. This was the start of the Goods and Services Tax (GST) in 2017. GST's kick-off was a big event in our money landscape. At the start, folks said this new tax was a big deal for India's money and tax changes. Basically, GST works because it’s a place-based tax. But, the start of it meant India’s money journey was on a whole new path.
Imagine a common tax for all under the banner "One Nation, One Market, One Tax". That's the idea behind the Goods and Services Tax (GST). It transformed many tax rules into one reliable code. The goal? Unity. Benefits for everyone. In only six years, GST's effect on the economy is a big deal. It's kicked technology up a notch. It's a champ against cheating in business.
The GST Council created an entire system. It includes more than 1300 items and 500 services split into four tax brackets: 5%, 12%, 18%, and 28%. The tax base has doubled since getting started in 2017, showing it's growing. It collected nearly 1.65 lakh crore rupees in December. That shows how much it contributes to the budget. The council meets often. They talk about ways to streamline things, make it better and broader. Part of that involves pulling more businesses into the fold of this reform. The Insolvency and Bankruptcy Code (IBC) is part of it too.
The goal is to enhance the recovery process for troubled businesses. Switching focus, the Insolvency and Bankruptcy Code (IBC) is an essential reform in India's economy. It helps to build a solid financial framework for the country.
The IBC was rolled out in 2015 by then-Finance Minister Arun Jaitley. It received approval from Parliament in 2016. The IBC aims to boost business insolvency rules. It sets fixed timelines for sorting out corporate bankruptcy cases.
The Insolvency and Bankruptcy Board of India provides data. It shows the effectiveness of the IBC. It has helped turn around 2622 companies through different methods: 722 with resolution plans, 1005 through appeals, reviews, and settlements, and 897 with withdrawal plans.
These are accounted for until June 2023. Examining it differently, the IBC's effectiveness has been questioned due to falling recovery percentages and increasing lengths of resolution times. Even with its significant achievements, these patterns have dulled the impact of the IBC and its achievement of its original aims.
Examining it differently, the IBC's effectiveness has been questioned due to falling recovery percentages and increasing lengths of resolution times. Even with its significant achievements, these patterns have dulled the impact of the IBC and its achievement of its original aims.Looking broadly, the South Asian area's total economy (GDP) is expected to rise by 5.2% in 2024. This increase is mainly due to India's impressive growth, which secures its place as the world's fastest advancing large economy. The UN recently forecasted a 6.2% growth rate in India's economy in 2024. A strong expansion in various areas backs this view. Shantanu Mukherjee, who heads the Economic Analysis and Policy Division, shared that the GDP growth rates for 2022 to 2025 are slated to be 7.7%, 6.3%, 6.2%, and 6.6%.
At the Gujarat Vibrant Global Summit 2024, India's Prime Minister shared his plan for India to become a top-ranking world economy. He stated, "At present, India stands as the fifth-largest economy globally. A decade ago, we were at the 11th spot. Major global entities predict a bright economic future for India. They see us rising to a position among the top three economies. While everyone across the globe is welcome to verify this, I confidently affirm that this will indeed be a reality."
“Everyone knows about the global circumstances. Hence, the strong stand of the Indian economy, the speed of India's progress, is partly due to the major changes made in the past ten years. These modifications have bolstered the size, skill, and rivalry of India's economy," he added.
