On Tuesday, 7th August, Finance Minister Nirmala Sitharaman introduced the Finance Bill 2024 for the fiscal year 2024-2025 in the Lok Sabha. However, what was expected to be a smooth sailing of the Bill after the finance minister’s address turned into a heated debate. Members of the opposition pointed out critical issues on proposals in the budget and financial sector. The proposed 2024 Finance Bill will see some sectors win while others lose against the proposed regulations, as discussed below.
The Losers
The biggest losers in the proposed Finance Bill 2024 for the fiscal year 2024-2025 are low and middle-level income earners in India. The bill proposes a new tax regime where the standard deduction will be raised from Rs 50,000 to Rs 75,000 and scrap out all concessions under the previous regime. According to TMC MP Mahua Moitra, this proposed tax system will majorly oppress the poor in India, who make up approximately 60-65% of the population, and the middle class, who make up 31%, but spare those in the high-income category.
Regarding industries, one of the biggest losers following the proposals in the finance bill is the agricultural sector in the country. The Finance Bill 2024 has proposed introducing a new tax on farming equipment.
During the debate in the Lok Sabha on the 7th of August, the opposition greatly criticized this move. Mr Amar Singh, the vice president of the Punjab Pradesh Congress Committee, argued that India has a vast community of farmers and 50% of the country’s population depends on the agricultural industry for a living. The current income of farmers is approximately 18.4% of the gross domestic product (GDP), and the industry’s growth rate is currently at 1.4%, a sharp decline from 4.7% in 2022-2023. Taxation on farming equipment will further curtail the industry’s growth.
Similar to the agricultural industry, the gambling industry in India is also facing growth challenges due to taxation laws. Since mid-2023, the gambling industry in India has been subjected to a 28% tax on all revenue under new regulations. This regulation has been detrimental to the growth of the sector as several industry players find operating in this climate difficult. Nonetheless, online games and online casinos remain a favorite entertainment option for the majority of Indians despite the state’s lack of support for the industry.
Another sector in India that is buckling under the pressure of taxation is the medical and health insurance sector. Since July 2017, the sector has had to comply with the goods and services tax rate, which increased to 18% on life and health insurance premiums. This taxation has made the cost of acquiring health insurance services quite high for the majority of Indians, crippling the growth of the sector.
On Tuesday, 7th August, before the Fincae Bill was tabled for debate in the Lok Sabha, MPs from the INDIA bloc staged a protest at the entrance calling for a rollback of the goods and services tax on medical and health insurance. The proposed 2024 Finance Bill has yet to withdraw or reduce the aforementioned taxes.
The Winners
While the India Finance Bill 2024 was heavily criticized and opposed, a few industries have new proposals in their favor. The manufacturing industry in India is one of the few winners following the introduction of regulations that are looking to support a resurgence of the industry. The bill’s proposed rationalization of basic customs duty will see various products critical for manufacturing have reduced levies or be exempted from tax. Twenty-five critical minerals, such as lithium and cobalt, will be exempted from tax, while imported gold and silver will have reduced customs duty moving forward. This move is expected to translate into lower production costs and reduced costs for various commonly used products.
Experts anticipate that with these tax cuts and the promise of government investment in infrastructure, India stands a chance of developing a thriving manufacturing ecosystem. This will generate employment opportunities and mitigate the country’s high unemployment rate.
One of the other winners emerging in the proposed finance bill is the real estate sector. The bill has proposed significant long-term capital gains (LTCG) tax relief. This proposal comes as an amendment following uproar on the original proposal to scrap indexation benefits on capital gains on the sale of immovable property. The finance ministry has now proposed two options for players in the real estate sector. The first is to pay long-term capital gains tax rate of 12.5% without indexation, and the second is to pay 20% with indexation on property acquired before 23 July 2024. Furthermore, the Finance Bill 2024 has upheld the indexation benefit offered to taxpayers on properties bought or inherited before 2001.
The opposition has accused the current government of furthering an oppressive tax system while the country was expectant of corrective measures. India continues to have an imbalanced tax system, as 65% of taxes are collected from indirect tax, and 35% is from direct tax, which the opposition believes to be the country’s biggest hindrance to an equitable economy.