Finance Minister Nirmala Sitharaman presented her seventh Union Budget on 23 July for fiscal 2024-25. It announces a comprehensive set of proposals that will influence businesses and consumers. This year’s budget aims to streamline the tax regime, boost domestic manufacturing, and enhance economic growth.

Let’s explore the impact of the union budget on businesses and consumers.

Impact on businesses in new budget 2024
 

Here are the key highlights of the budget that will affect businesses –

• Direct taxation – Business income tax

The budget introduces a reduction in the corporate tax rate for foreign businesses, lowering it from 40% to 35%. There are also changes in tax structures for charities, foreign shipping companies operating domestic cruises in the country, and the calculation of capital gains.



• Indirect taxation

While there are no changes in excise taxes, the Union Budget has introduced several revisions in basic customs duties (BCD) to support domestic manufacturing and reduce production costs. Key proposals include –

- BCD on gold and silver cut to 6% and platinum to 6.4%

- Full exemption on 25 critical minerals, such as lithium and cobalt, reduction in BCD for two critical minerals, and removal of BCD on Ferro nickel and blister copper to cut production costs and support the processing and refining sectors

- Increase in BCD on ammonium nitrate from 7.5% to 10% and BCD on PVC, flex panels, and non-biodegradable plastics from 10% to 25% to curb imports and encourage domestic alternatives

- Increase in BCD on PCBA of specified telecom equipment from 10% to 15% to promote local manufacturing of telecom products

- Lower BCD on marine products to 5% to enhance the competitiveness of exports

- Duty exemptions on various inputs used in shrimp and fish manufacturing

- Reduction in BCD on methylene diphenyl diisocyanate (MDI) for spandex yarn production from 7.5% to 5%, reducing costs for textile manufacturers

• Compliance with various laws

- Decriminalising delays in filing TDS/TCS statements up to the due date will ease compliance pressures on businesses.

- The budget emphasises the need for further simplification and rationalisation of the Goods and Service Tax (GST) structure, which aims to reduce tax incidents and compliance burdens.

- In her Budget Speech, the Finance Minister proposed increasing the deduction for employer contributions to the National Pension System (NPS) from 10% to 14% of the employee’s salary.

• Support for startups and MSMEs

The Union Budget proposed the abolition of the Angel Tax to bolster the startup ecosystem and encourage more investments in new ventures. Similarly, enhancing the Mudra loan limit from ₹10 lakh to ₹20 lakh, along with new credit guarantee schemes, will support micro, small, and medium enterprises (MSMEs).

• Relief for e-commerce business

The budget reduced the tax deducted at source (TDS) rate on e-commerce transactions from 1% to 0.1%. The finance minister also withdrew the 2% equalisation levy. These moves will provide relief to digital companies. 

Impact of Union Budget on retail consumers
 

Here are the key highlights of the budget that will affect individuals and consumers –

• Changes in direct taxes

- The budget proposes revising the tax on short-term capital gains for certain financial assets to 20% and taxing long-term capital gains at 12.5%

- An increase in the standard deduction for salaried employees from ₹50,000 to ₹75,000 and a deduction on family pensions from ₹15,000 to ₹25,000 provide direct financial relief to individual taxpayers

- The revised rate structure under the new tax regime, as follows, will offer relief across different income brackets –

- 0-3 lakh – Nil

- 3-7 lakh – 5%

- 7-10 lakh – 10%

- 1-12 lakh – 15%

- 12-15 lakh – 20%

- Above 15 lakh – 30%

- The budget proposes deducting up to 14% of the salary of employees in the private sector, public sector banks, and public sector undertakings who choose the new tax regime for NPS contributions

These changes will affect consumer spending patterns as disposable income and financial health are impacted.

• Impact on changes in Customs duties and GST on consumer goods

The focus on customs duties and tax reforms will reduce production costs, lead to better prices, and enhance product availability for consumers. The reduced customs duties on gold, silver, and platinum, as well as on cancer medicines, X-ray equipment, mobile phones, and chargers, will lower their prices. Solar cells and panels are now also exempt from customs duties. As a result, leather and textile garments, footwear, and other leather goods are expected to become more affordable. On the other hand, plastic products and telecom equipment costs are likely to rise.

The budget also exempts three medicines for cancer patients from customs duty, reducing healthcare costs for consumers.

Other important highlights
 

The Union Budget introduces a significant focus on agriculture, including a push for natural farming for one crore farmers and the enhancement of production, storage, and marketing of pulses and oilseeds to boost self-reliance. A digital crop survey will also cover six crore farmers, improving crop area estimation and farm registry. At the same time, a new National Cooperation Policy will support the development of the cooperative sector.

The Finance Minister has also announced a new initiative to offer internships to 1 crore young people at the top 500 companies over the next 12 months. This scheme aims to enhance employment prospects and provide valuable experience for youth. This could lead to a more skilled workforce and reduce unemployment rates, which, in turn, would positively impact the economic environment and consumer spending power.

Overall, the new budget identified nine priorities for generating ample opportunities for both businesses and individuals –

• Productivity and resilience in agriculture
• Employment and skilling
• Inclusive human resource development and social justice
• Manufacturing and service
• Urban development
• Energy security
• Infrastructure
• Innovation, research and development
•  Next generation reforms

In conclusion
 

The Union Budget 2024 introduces significant reforms aimed at both businesses and consumers. Key changes for businesses include adjustments in customs duties and support for startups and MSMEs. Consumers will benefit from increased deductions, revised tax structures, and lower prices on certain goods.

These measures will stimulate economic growth, enhance domestic manufacturing, and improve financial well-being, leading to more balanced economic progress across sectors.