Prime Minister Narendra Modi has recently come to power for a third term and this time with a coalition government. The announced on 23 July 2024 proposes multiple changes aimed towards corporations, small businesses and MSMEs. Attracting more foreign capital to the Indian market, corporate tax on foreign companies has been reduced from 40% to 35%. An increase in tax, however, has been proposed for transactions tax on futures transactions to 0.02% and options of securities to 0.1%. A newer development is seen for income received on the buyback of shares to now be taxed. Angel tax has been abolished for all classes of investors.
For operations of companies, changes to applicable laws and regulations have been proposed in order to speed up insolvency resolution by strengthening the tribunal and appellate tribunals. Additional tribunals are also proposed to be established, of which some shall exclusively preside over matters (such as those relating to share capital and debentures or mismanagement of monies invested with a company etc.) under the Companies Act. Additionally, to improve the debt recovery process in the country, strengthening of debt recovery tribunals has also been proposed in the budget by establishing additional tribunals.
For Indian professionals working in multinationals, the budget proposes de-penalisation of such professionals not reporting small foreign assets of movable nature up to INR2 million (USD23,888). This is for those Indian professionals that get Employee Stock Ownership Plans (ESOPs), and invest in social security schemes and other movable assets abroad.
The budget also renews focus on increasing employability of employees and introducing incentives for companies that hire additional workers. These benefits and incentives are attached to a provident fund availed by the employers-employee and provides for an added boost to people joining the workforce for the first time.
For MSMEs
The budget also makes it easier for businesses and MSMEs to reach and make use of banking services. The budget aims to make banking services available to the remotest of corners, as well as major MSME cluster areas. Hence, the budget proposes to set up more than 100 branches of the India Post Payment Bank in the northeast region to expand the banking services.
The budget also proposes that the Small Industries Development Bank of India (SIDBI) is set to expand and reach all major MSME clusters within three years, and provide direct credit to them. Some 24 branches are planned to open within this year, which is likely to expand services to 168 clusters of 242. The ease of banking services is just one of the many other proposed enhancements and encouragements by the budget for MSMEs. Some of these include, a revised MSME credit assessment model, credit support during stress period, increased limit of mudra loans, financial support for food irradiation, quality and safety testing, e-commerce export hubs etc.
Tech boost
The brought a renewed focus on the integration and widespread use of technology and technological solutions and advancements in the everyday use and implementation of various policies and practices. Digital public infrastructure (DPI) applications have been proposed to be built at population scale for productivity gains, business opportunities, and innovation by the private sector. The planned areas for these are credit, e-commerce, education, health, law and justice, logistics, MSME, services delivery, and urban governance.
In addition to this, the budget speech remarked on the rapid and successful development and wide use of technology boosting its economy. This has in turn led to improvements in access to market resources, education, health and services by the common people of the country. Hence, the budget proposes to step up technology adoption and move towards digitalisation of the economy.
The integration of technology has also been extended to going paperless in various operations of the state including tax. Multiple tax services are already available in the digital format and the budget proposes that remaining tax services including rectification and orders giving effect to appellate orders will go paperless in the next two years by adopting digitalisation.
The insolvency and bankruptcy process in the country also stands to benefit from the increased focus on technological integration. The budget proposed to set up an integrated technology platform to improve outcomes under the insolvency and bankruptcy law. This is expected to bring consistency, transparency, timely processing and better oversight for stakeholders involved.
