Narendra Modi 3.0: The Union Budget wish list for 2024-25

A shift in focus is expected in the budget, and rightly so, to alleviate ‘rural stress’, generate employment, support Micro, Small and medium Enterprises (MSMEs) to enhance competitiveness, and improve productivity in the farm sector, which employs 40 percent of our workforce but contributes hardly 14-15% to GDP.

The main thrust will be rural-centric, providing social equity, creating an eco-system for ‘private CAPEX’ to pump prime the economy, and pushing consumption through the spin-off benefits of the multiplier effect rather than through the ‘debt route’. The budget will focus on protecting the vulnerable sections of society and thrusting to ‘GYAN’—Garib, Youth, Agriculture, and Nari Shakti.

The FM may also allocate sizable funds in the form of a ‘special package’ if not granting ‘special status’ for the new Andhra government with Chandrababu Naidu as CM and to the Bihar government headed by Nitish Kumar, who are the kingmakers in the new NDA government.

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Taxation expectations

With the budget focus revolving on the above critical issues, the specific ‘wishlist’ pertaining to certain important sectors and taxation is as follows:

● Granting infrastructure status to the entire real estate sector presently restricted to ‘affordable housing’. The importance of affordable housing is explicit with the first decision of Prime Minister Modi after assuming office when he announced ‘3 crore new houses’ to be built under the Prime Minister Awas Yojana (PMAY), which will directly benefit the rural and urban beneficiaries.

● Granting infra status will encourage builders to take up affordable housing projects by securing bank loans at reduced interest rates and engaging in ‘mixed construction’ activities. This is crucial for realising ‘housing for all’, the deadline of which will be pushed to 2025 from 2024.

● Reintroduce the Credit Linked Subsidy Scheme (CLSS) under the PMAY until 2025.

● To set right the anomaly in the definition of ‘affordable housing’, re-defining affordable housing as a residential unit with 90 sqm carpet area and ₹65 lakh flat cost in metros (presently it is 60 sqm carpet area/₹45 lakh flat cost) and revise the ceiling from 90 sqm to 120 sqm and the unit cost from ₹45 lakh to ₹55 lakh in non-metros. By capping the value of apartments at  ₹45 lakh and the ‘area ceiling’ to avail one percent GST benefit without input credit, the impractical ceiling limits are similar to burning the candle at both ends.

● GST at 28 percent for cement and 18 percent for steel, major components in the construction activity, defeats the main objective of promoting affordable housing. Rates must be rationalised to at least 18% for cement and 12% for steel to boost construction activity. In addition, general rationalisation of tax slabs and tax rates of various commodities with a three-tier slab of 18 percent, 15 percent, and 8 percent is needed.

● Extend the tax holiday on profits earned from affordable housing projects under Sec 80IBA by at least another year for projects approved until March 31, 2023, to augment the supply of affordable housing and compensate builders in a liquidity crisis with lukewarm demand for affordable apartments.

● To give effect to the ‘affordable rental housing scheme’ with greater IT benefits to promote rental housing among migrant workers.

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Rebates and limits

● The benefit of ₹1.5 lakh rebate under principal deduction of housing loan EMIs has to be treated separately and not under the ‘omnibus’ benefits under Sec 80C and deduction under ‘interest paid for housing loans’ to be enhanced from the present ₹2 lakh to at least ₹3 lakh under Sec 24.

● The limit of ₹2 lakh should be raised to ₹3 lakh under Sec 24B for home loans availed on or after 1 April 1999, and the limit should be raised from the present ₹1.5 lakh to at least ₹2 lakh under Sec 80EEA for apartments/house properties having a stamp value of ₹45 lakh.

● The Productivity-Linked Incentive (PLI) scheme should be introduced in the affordable housing segment to incentivise all the stakeholders.

● Single-window approvals with clear timelines for all construction-related permissions must be introduced, and bring all the stakeholders under the radar of RERA.

● Tax cuts on short-term capital gains to 10% and holding periods to 1 year for REITs and InvITs to attract long-term funds for affordable housing and infra, which have long gestation periods, continue to be on the wishlist.