Union Finance Minister Nirmala Sitharaman is set to present the interim Budget on February 1, providing a glimpse into the government’s fiscal roadmap until the new administration takes charge after the upcoming 2024 Lok Sabha elections.
Despite assurances of no “surprise announcements,” market observers and investors are on the edge of their seats, eagerly anticipating key developments in six crucial areas:
National Pension System (NPS) Reforms:
Expectations are rife that the government may sweeten the deal for contributors and withdrawers of the National Pension System (NPS), particularly for senior citizens above 75 years, by extending tax concessions.
PFRDA’s call for tax parity:
The Pension Fund Regulatory and Development Authority (PFRDA) is seeking tax parity with the Employees’ Provident Fund Office (EPFO) for employer contributions. Anticipated announcements in this regard could reshape the taxation landscape for these contributions.
Boosting agricultural credit:
Observers reveal that the interim budget might witness a substantial increase in the agricultural credit target, ranging from ₹22-25 lakh crore for the next fiscal year. The government’s focus is to ensure every eligible farmer has easy access to institutional credit.
Expanding PLI Scheme:
To stimulate the manufacturing sector and foster employment, the government is contemplating expanding the Production-Linked Incentive (PLI) scheme. Deloitte suggests that sectors such as garments, jewellery, and handicrafts could be included to further incentivise growth.
Taxation on wealthy farmers:
In a bold move to address fairness in the taxation structure, there are whispers of the government considering income tax on affluent farmers. This suggestion comes from Reserve Bank Monetary Policy Committee (MPC) member Ashima Goyal, signalling a potential shift in tax policy.
Extension of Corporate Tax Benefits:
As a measure to encourage private investments, Ernst & Young, a multinational professional service firms in the world, recommends extending the concessional 15% income tax rate for corporates setting up new manufacturing units. If implemented, this extension would remain in effect until March 31, 2025.
As the nation eagerly awaits the Finance Minister’s address, the interim budget promises to be a crucial document, setting the tone for economic policies in the transition period leading up to the new government.
