ICAI chapters in three countries discuss the Indian interim budget

Ritu Jha–

India’s Union Budget for 2024 focuses on demographic, democratic, and diversity strengths,” Ved Jain, veteran chartered accountant and former President of the Institute of Chartered Accountants of India (ICAI) said during India’s Budget – 2024 analysis, a Zoom event hosted by the Institute of Chartered Accountants of India (ICAI) San Francisco chapter along with British Columbia’s ICAI chapter in Vancouver and ICAI India on Feb 3.

The Indian government presented the interim budget on Feb 1.

“The Budget 2024 though interim is a Viksit Bharat 2047 budget,” Jain stated to the Chartered Accountants, who joined from US, Canada and India as well. “The important agenda in this budget is to constitute a committee on how India will be in the future. India’s population is going to increase till 2030 and thereafter there is a possibility that we will see a reversal. For that period, the government has made a plan anticipating how things will develop.”

Jain believes that Finance Minister Nirmala Sitharaman has not only succeeded in keeping the fiscal deficit low but that it will cut down inflation. “The fiscal deficit is targeted at 5.1 percent of the GDP as against 5.8 percent last year. And next year it is going to be 4.5 percent. That will ensure that the rupee-dollar conversion rate will be stabilized because there will be no inflation.”

He also presented slides on how the tax collections are giving India’s economy a buoyancy. “And this time we are projecting that our GDP ratio will be 11.3 percent of tax revenue. This shows how India is progressing towards becoming the third-largest economy in the world. By 2027-2028, India’s economy will be touching $5.4 trillion, and becoming the third-largest economy. India is dreaming of being one of the largest economies by 2047. India’s foreign exchange reserves have reached US dollar 623 billion dollars. And in the last five years, India has got $596 billion worth of investment. These are some of the indicators of how the Indian economy is doing.”

There are also different schemes for agriculture, food, and housing. Another important aspect of the budget is to install one crore solar rooftop panels which will save monthly electricity bills. That can be a big game-changer. The railways too are getting a major boost as there are budgetary outlays for three corridors. One of them is going to be an energy corridor, another for mineral and cement, and port connectivity, and the third is for high traffic density

Jain urged the audience of the online event to grab “this opportunity, coming to each one of you”.

Jain also pointed out a drawback in the budget. “There is a clause that in case a new company sets up a new manufacturing unit in India, its income would be taxed at 15%. The sunset clause at present is 31st March 2024 but for one reason or another the finance minister has not extended this deadline of the clause. I am of the view that in case we want for Make in India scheme a success and beat China as a global capital of manufacturing. This type of concession was important and needed to be extended for many years.”

During the event, audience asked Jain about capital gain benefits announced for companies that invested in a stock exchange in International Financial Services Centre (IFSC) which companies are listed there, and how one can benefit from it. “India is trying to replicate Singapore’s financial strategies at the International Financial Services Center in Gift City, Gujarat. All benefits that are available to a business entity in Singapore are being offered at GIFT City.”

In reply to another query, Jain turned his focus on incentive plans announced recently for NRIs looking to invest in startups in India. “There is already a scheme for startups and that was extended by one year. Any startup will be covered under this scheme if its operations begin before March 31, 2025. The income of these startups will be exempt for seven years.”

The next question was from Sonal Goyal from British Columbia ICAI chapter in Vancouver, Canada asked about the changes that are going to impact the taxation on the income generated by online services or digital platforms. “A taxpayer is ready to pay tax on the income which he is making, but the challenge is which country will take which income and how it is going to be taxed. The trade, the way the Internet and related things are moving is an area that is changing. A lot of discussions are going on OECD pillar one, pillar two – which is going to be divided and which will be taxed. The only solution that I can see is that in the near future, all countries will have to come together and create a model of how it is going to be divided between different countries,” Jain explained.

The next question posed by Goyal was about overall financial planning. “We all know how important it is for every single person who is either sitting in India or outside of India, especially when we talk about the NRIs. Have there been any modifications to the tax treatment for
the NRIs’ foreign assets or investments which may impact their overall financial planning in the future?”

“Absolutely nothing has been touched about this in this budget. The only thing that happened two years back was when the government said that in case you have stayed in India for more than 120 days, your income will be taxable. One of the solutions that we give to such people is to make sure that their income in India does not exceed Rs 15 lakh. I think it’s a disincentive for investments in India, which to my mind is not good,” Jain added.

When asked about the tax treatment for the money that is owned by NRIs in India but is remitted abroad, Jain informed: “Whatever income arises in India, one is supposed to pay tax in India as per Indian tax law. If an NRI has an income, he or she can opt for treaty benefits like dividend income, and get it at a concessional rate. Also, every year, an NRI is permitted to bring $1 million from India. But if there is an income in India, you can pay taxes and then remit to the US. I believe that that applies to anyone who is providing online services, like contractual services, and remote work locations in India.

“It is an interim budget because it’s an election year and the final budget will be coming later. But still, I think it just laid a good foundation for what these budgets are trying to achieve at the country level. I mean, at the individual level, there was not much change, but it gave us at a country level which is very important for NRIs. We want to see the stability of the currency. If you lose it on currency with the rupee becoming weaker, you don’t gain by investing in India. And that is where most people lose interest. Because the devaluation of the rupee is not going to bring any income,” Sudha Michel told indica.

“The Indian rupee will be hopefully stable and maybe even get stronger,” she added. “Earlier the country’s budgets used to be all about taxes but this budget has also focused on social programs. That kind of focus on the social development of all strata of society tells us that India is
really trying to think like a developed country.”

Thanking Jain for his extensive explanation about the budget, Vish Arunachalam, founder, chairman, and director of the ICAI of San Francisco chapter on hosting the collaborative event told indica, “Many thanks to CA Ved Jain and ICAI leaders from North America who participated in the well attended India Budget 2024 event organized at short notice with the cooperation of seven ICAI chapters. Although it was a vote on account budget, it was great to listen to the tax luminary and the panel on their perspectives. We hope to organize a full-fledged event when the regular budget is submitted to Parliament after election of a new government.”

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