Impact of Union Budget 2024-25 on Businesses in India

The Union Budget 2024-2025 has garnered significant attention, with several key measures poised to impact businesses across various sectors. In this blog, we will dissect these measures, providing insights on how they will shape the business landscape in India.

Introduction

The Union Budget 2024, presented by Finance Minister Nirmala Sitharaman, is designed to foster economic growth, enhance infrastructure, and support small and medium enterprises (SMEs). This budget emphasizes digitization, sustainability, and inclusive growth, aiming to create a robust business environment.

Key Highlights of Union Budget 2024-2025

1. Tax Reforms and Incentives

• Corporate Tax Reduction: The government has proposed a reduction in corporate tax rates for businesses with an annual turnover of up to ₹500 crores from 25% to 22%. This aims to boost the profitability and competitiveness of small and medium enterprises.
• Start-up Tax Exemptions: Start-ups will benefit from extended tax holidays and easier compliance norms, encouraging innovation and entrepreneurship.

2. Digitization and Technology

• Digital India Expansion: Increased allocation for the Digital India program aims to enhance digital infrastructure, promoting e-governance and digital payments. This will facilitate smoother business operations and improved access to government services.
• AI and Blockchain Initiatives: Investments in AI and blockchain technologies will support businesses in adopting cutting-edge technologies, enhancing efficiency, and driving innovation.

3. Infrastructure Development

• Infrastructure Boost: A significant portion of the budget is allocated to infrastructure projects, including roads, railways, and ports. Improved infrastructure will reduce logistics costs and enhance supply chain efficiency for businesses.
• Smart Cities Mission: Continued support for the Smart Cities Mission will create more business opportunities in urban development and related sectors.

4. Sustainability and Green Initiatives

• Green Energy Investments: Increased funding for renewable energy projects will encourage businesses to adopt sustainable practices, reducing their carbon footprint and operational costs.
• Environmental Regulations: Stricter environmental regulations will push businesses towards eco-friendly operations, promoting sustainability.

5. Financial Inclusion and Support

• MSME Support: The budget includes various measures to support MSMEs, such as easier access to credit, enhanced insurance coverage, and skill development programs.
• Financial Schemes: Introduction of new financial schemes tailored for sectors like agriculture, manufacturing, and services to ensure inclusive growth and development.

Sector-Wise Impact

1. Manufacturing

• PLI Scheme Extension: Extension of the Production Linked Incentive (PLI) scheme will attract more investment in the manufacturing sector, boosting production and exports.
• Automation and Robotics: Increased focus on automation and robotics will enhance productivity and reduce labor costs.

2. Services

• IT and ITeS Growth: With a focus on digital transformation, the IT and IT-enabled services (ITeS) sector will see significant growth, driven by government initiatives and increased funding.
• Healthcare and Education: Enhanced budget allocations for healthcare and education will create more business opportunities in these sectors, fostering growth and innovation.

3. Agriculture

• Agri-Tech Innovations: Support for agri-tech innovations will improve agricultural productivity, supply chain management, and market access for farmers.
• Rural Development: Increased investment in rural development will boost the rural economy, creating more business opportunities in agribusiness and rural enterprises.

4. Retail and E-Commerce

• GST Simplification: Simplification of GST compliance will make it easier for retail businesses to operate, reducing administrative burdens and improving cash flow.
• E-commerce Regulation: New regulations to protect consumer rights in e-commerce will build trust and encourage more online transactions.

5. Real Estate and Construction

• Affordable Housing: Increased incentives for affordable housing projects will drive growth in the real estate sector, making housing more accessible and stimulating construction activities.
• Urban Development: Continued focus on urban development projects will create opportunities for real estate developers and construction companies.

6. Banking and Finance

• Credit Expansion: Measures to expand credit availability, especially for MSMEs and rural sectors, will support business growth and financial inclusion.
• Fintech Support: Initiatives to promote fintech innovations will enhance financial services, making them more accessible and efficient.

7. Tourism and Hospitality

• Tourism Infrastructure: Increased investment in tourism infrastructure, including heritage sites and travel facilities, will boost the tourism and hospitality sector.
• Hospitality Incentives: Tax incentives for the hospitality industry will encourage investment and development, enhancing India’s attractiveness as a tourist destination.

TDS (Tax Deducted at Source) Rates and Industry-Specific Tax Implications

1. TDS Rate Changes

• Interest Payments: The TDS rate on interest payments to non-banking financial companies (NBFCs) has been reduced from 10% to 7.5%. This reduction aims to increase liquidity and reduce the tax burden on businesses.
• Professional Services: For professional services, the TDS rate remains at 10%, ensuring consistent tax collection while maintaining ease of compliance for service providers.

2. Industry-Specific Tax Implications

• IT and ITeS: The budget provides tax benefits for IT companies engaged in research and development (R&D), with a 150% deduction on expenses incurred for R&D activities. This incentive encourages innovation and technological advancements.
• Manufacturing: Companies in the manufacturing sector can avail of an additional depreciation of 20% on new machinery and plant investments. This incentive promotes modernization and capacity expansion.
• Healthcare: The healthcare sector receives tax exemptions for investments in hospital infrastructure in tier 2 and tier 3 cities. This move aims to improve healthcare accessibility and quality in smaller cities.
• Agriculture: Agricultural businesses benefit from subsidies and tax exemptions on investments in agri-tech and sustainable farming practices. These incentives are designed to enhance productivity and sustainability in the agricultural sector.
• Real Estate: Real estate developers receive tax incentives for affordable housing projects, including a 100% tax deduction on profits derived from such projects. This measure aims to address housing shortages and promote urban development.

Conclusion

The Union Budget 2024-2025 presents a comprehensive plan to stimulate economic growth, enhance infrastructure, and support businesses across various sectors. By focusing on tax reforms, digitization, sustainability, and financial inclusion, the budget aims to create a conducive environment for businesses to thrive. As businesses adapt to these changes, they can leverage the opportunities presented by the budget to drive growth and innovation.

For more overview read our blog:- Overview of India’s Budget 2024: A Comprehensive Guide