INTERIM BUDGET 2024 – KEY HIGHLIGHTS: 

• India’s Interim Budget, 2024 delivered by the Finance Minister on 1st February, 2024, laid out the government’s spending plans for the first half of the upcoming fiscal year. 

• The Finance Minister confirmed the continuation of existing tax rates, covering direct, indirect taxes, and export duties.

• She also disclosed an 11% surge in the upcoming year’s capex outlay,reaching ₹11.1 lakh crore.

• Sitharaman, during the fiscal year’s federal budget announcement, revised the fiscal gap to 5.8% of the gross domestic product.

• The Finance Minister also introduced a housing scheme for the deserving middle class, focusing on those living in rented houses, slums, chawls, or unauthorised colonies. This initiative would assist them in acquiring or constructing their own homes.

• Amid various announcements benefiting youth, the impoverished, women, and farmers, Sitharaman highlighted the extension of Ayushman Bharat healthcare coverage to all ASHA and Anganwadi workers and helpers.

 BUDGET ON GIFT CITY:

• Finance Minister Nirmala Sitharaman has granted an additional year for certain businesses to establish units at the International Financial Services Centre (IFSC) to avail tax exemptions under Sections 10(4D) and 10(4F) of the Income Tax Act, 1961. 

• Tax exemption for Sovereign Wealth Funds and Pension Funds under Section 10(23FE) of the IT Act has been prolonged by one year, now applicable until March 31, 2025. The tax holiday for various businesses at the IFSC is without any

• sunset clause. However, some, such as aircraft and ship leasing companies, were required to commence operations before March 31, 2024 to benefit from tax advantages. 

• The Budget proposed extending this deadline to March 31, 2025. The Finance Minister additionally stated that the unified regulator IFSCA “s creating a robust gateway for global capital and financial services for the economy.

 IMPACT OF TAX EXTENSION:

• As of September 30, 2023, there were 15 registered units for aircraft leasing and four ship leasing units, according to IFSCA data. According to the National Securities Depository website, there are a total of 35 foreign portfolio investors (FPIs) registered in GIFT IFSC.

• This extension is expected to boost new as well as existing IFSC banks based in GIFT City to fast-track the establishment and launch of investment divisions. It will also propel he establishment of aircraft and ship leasing companies.

• The tax exemption offered to sovereign wealth funds and pension funds in GIFT City serves as a compelling incentive to attract foreign investment. This tax relief has the potential to enhance GIFT City’s appeal to these funds, fostering greater foreign investment in India.

• This, in turn, can contribute to the growth of GIFT City as a global financial hub, positively impacting the Indian economy by promoting job creation and infrastructure development.

GIFT CITY – AN OCEAN OF OPPORTUNITIES:

• The decision to extend tax exemptions on specific IFSC unit income reflects a forward-looking approach. 

• The government’s continued support, emphasising GIFT IFSC’s pivotal role in the global financial landscape is encouraging rapid economic expansion and enabling the country to become a potential destination for international entities to engage in economic activities.

• Among other tax benefits in GIFT City, dividends received by non-residents from an IFSC unit are taxable at a concessional rate.

• Interest income on money lent to IFSC units is not taxed.

• Furthermore, surcharge and health and education cess do not apply to certain incomes earned by specified funds in the IFSC.