A roadmap to Viksit Bharat

Union Budget 2024’s focus on the TMT sector presents a comprehensive and strategic roadmap for advancing India’s technological capabilities.

Finance Minister Nirmala Sitharaman presented the first full-fledged budget of the Modi government’s third term. The Union Budget 2024 has set ambitious targets to drive transformative changes across various sectors, strongly focusing on leveraging technology to propel progress towards Viksit Bharat. This budget aims to lay a robust foundation for future growth by focusing on innovation, digital infrastructure, and supportive policies for the technology and telecom sector.

One of the most notable features of Union Budget 2024 is establishing a mechanism to stimulate research and development in the private sector. The government has allocated a substantial corpus of Rs 1 trillion for financing at low or nil interest rates. This initiative, coupled with the operationalisation of the Anusandhan National Research Fund, aims to boost basic research and prototype development. By creating a conducive environment for cutting-edge research, the government seeks to encourage innovation and technological advancements that will drive India’s progress.

The budget earmarks a considerable allocation of Rs 1,163,420 million for IT and telecom expenditures, underscoring the sector’s critical role in national development. Here are key insights into Budget 2024 from the technology, media, and telecom sector perspective.

Withdrawal of the Equalisation Levy

One of the most significant changes introduced in Budget 2024 is the withdrawal of the 2% equalisation levy on non-residents’ digital sales, effective 1 August 2024. This levy had imposed a compliance burden on global digital suppliers, impacting international digital transactions.

One of the most significant changes introduced in Budget 2024 is the withdrawal of the 2% equalisation levy on non-residents’ digital sales.

Its removal represents a considerable relief for these suppliers, simplifying tax compliance and promoting smoother cross-border digital transactions. The elimination of this levy is expected to enhance India’s attractiveness as a digital marketplace and facilitate easier business operations for international technology companies.

Abolition of Angel Tax

Another transformative measure is the abolition of the angel tax, effective from 1 April 2024. This tax relief is aimed explicitly at the startup ecosystem, encouraging investment by removing the tax on angel investors. The goal is to inject fresh capital into startups, thereby supporting entrepreneurial ventures and the growth of new technology-driven businesses.

By removing this tax, the government is taking a significant step towards stimulating the startup ecosystem, promoting innovation, and enhancing the overall vibrancy of the technology sector.

Buyback Taxation

The budget also introduces changes in the taxation landscape to promote equality. Notably, the burden of buy-back taxes has been shifted from companies to shareholders, with such transactions now being treated as dividends. Furthermore, reducing withholding tax rates from 1% to 0.1% is expected to ease financial obligations for e-commerce players.

These tax relief measures are likely to support growth in the digital marketplace by improving financial liquidity for businesses.

Adjustments in Import Duties

Union Budget 2024 brings several critical adjustments in import duties to enhance affordability and promote domestic manufacturing. The Basic Customs Duty (BCD) on cellular mobile phones, printed circuit board assemblies (PCBA), and chargers/adapters has been reduced from 20% to 15%. This reduction is set to enhance consumer affordability and stimulate demand for these essential technology products.

Conversely, the budget introduces an increased BCD on PCBA for specified telecom equipment, rising from 10% to 15%. This move is intended to promote domestic manufacturing and reduce reliance on  imported components.

Further supporting the domestic industry, the budget extends import exemptions for critical goods such as lithium-ion cells and electronic component tools. By doing so, the government aims to enhance the competitiveness of the Indian industry. Additionally, certain customs benefits for IT and electronics machinery, semiconductor wafer manufacturing tools, and entertainment technology have been extended. These measures are designed to foster technological advancement and support the technology sector’s growth.

Overall Strategic Impact

In essence, Union Budget 2024 presents a comprehensive and strategic roadmap for advancing India’s technological capabilities. By focusing on innovation, reducing tax burdens, and supporting domestic manufacturing, the budget sets the stage for sustained economic growth in the digital era.

The measures outlined are designed to bolster the technology and telecom sectors and drive broader economic progress. This strategic approach positions India as a burgeoning leader in the global digital economy, ready to capitalise on emerging opportunities and navigate the complexities of a rapidly evolving technological landscape.

The Union Budget 2024, therefore, is more than just a financial plan; it is a visionary blueprint to transform India into a global technology hub. As India strides towards becoming a developed nation, the measures introduced in Budget 2024 will play a crucial role in shaping the future of the country’s technological landscape and economic prosperity.

 By Peeyush Vaish

The author is a Partner and TMT industry leader at Deloitte South Asia.

With inputs from Madhava Yathigiri, Partner, Deloitte India and Mounika Vemula, Associate Director, Deloitte India.

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