Transcript for:
Budget 2024 Presentation Notes

"Even the biggest Modi supporter is furious at the government." "It seems like the government is ready to squeeze money out of the middle class, but their millionaire and billionaire friends, are given benefits after benefits." "Friends, look at this article. Income Inequality in our nation wasn't this bad even during British Raj." Hello, friends! On 23rd July, Finance Minister Nirmala Sitharaman presented Budget 2024. And the negative reaction of the public for this budget was at a different level. Even the biggest Modi supporter started expressing anger against the government. Look at these tweets. Till 17th June, these people were saying that they want to see dictator Modi. By 23rd July, they started asking, not to be treated like beggars. Those who were saying till 9th June "Now I can die peacefully," By 23rd July they started saying, "Worst government I have seen in terms of tax issues." Comedian Abhijit Ganguly's tweet went viral, "If I earn money, Nirmala taxes it." "If I spend money, then also Nirmala taxes it." "If I don't earn or spend both and my money is just lying in investment, Nirmala taxes that too!" "And the best part is, if I pay tax, there is an additional cess on it, so Nirmala taxes the tax amount." These memes on the Finance Minister went viral. "You can't defeat me. -I know, but she can." This flowchart also went viral, explaining this logic. Whatever salary you get, you pay 30% direct tax on it. If you invest the remaining amount, and start earning returns in the short term, you pay 20% tax on it, If you earn slowly, you pay 12.5% as tax but if you incur any losses, that's completely on you. On the other hand, if you decide to spend your money, then under the GST Laws, you pay 12% as tax on basic items, 18% tax on kind of fancy items, and up to 28% tax on luxury items. So the question arises, is this budget really that bad? Let's understand this in depth in today's video. Let's start with the most criticised part. Capital Gains tax. This tax is levied when you sell your asset, like a house or land, or when you make a profit from your investment. Like when you invest in the stock market or mutual funds. Capital gains tax is divided into two parts. If you are buying or selling specified assets within one year, then it is known as "Short Term" and the tax that is imposed on such transactions, it is called Short Term Capital Gains tax. In short, it is called STCG. But if you hold your investments for more than a year, it is known as a "Long Term" period. and in such cases, the tax imposed is known as Long Term Capital Gains tax. Or LTCG. In this new budget, the government has increased both these taxes. The Short-Term Capital Gains tax has been increased by 5%. Earlier it was 15%. Now it has been increased to 20%. And the Long-Term Capital Gains tax has been increased by 2.5%. Earlier it was 10% and now it is 12.5%. But in this case, the government has increased the exemption too. Earlier, there was an exemption of ₹100,000, now the exemption is ₹125,000. Meaning, if within the year, your profit is less than ₹125,000, then you won't have to pay this tax. Now, obviously, people who invest their money in the stock market or mutual funds, are angry with the government because it is directly detrimental to them. Apart from this, people who engage in Futures and Options trading, see this as bad news too. A Securities Transaction Tax is already imposed on their trading. Earlier, on Futures, this tax was at 0.0125% of the transaction value. Now, it has been increased to 0.02%. And in Options, earlier it was, 0.0625% of the option premium. Now, it has been increased to 0.1% of the option premium. But, if we look at it from the government's perspective, what can be the justification of increasing these taxes? The answer to this is hidden, probably in the Economic Survey of 2023-2024. For those who don't know, the Economic Survey is an annual report. It is presented every year before the budget. And it is drafted by the Economics Division of the Department of Economic Affairs under the guidance of India's Chief Economic Advisor. Finance Minister Nirmala Sitharaman on 22nd July, the day before the Budget, presented this economic survey before the Parliament. If you look at page 65 of this survey, it is clearly written "If equity market claims on the real economy are excessively high, it is a harbinger of market instability rather than market resilience." In simple words, they are saying that the stock market is turning into a bubble. And if the market claims are too high, it leads to market instability. It's interesting to note that till now, whenever the government was criticised on issues like the economy, unemployment, or inflation, they told people to look at the stock market and how high it is moving. Presenting the growing stock market as an indicator of development in our nation. But now they are saying that the growth of the stock market is not an indicator. If the stock market is growing excessively, then it can cause market instability. Clearly, the government wants to discourage this. Especially Futures and Options trading, which, in my opinion, is a risky venture. Many people who do not understand this properly, lose hundreds of thousands of rupees of their life savings, in their greed for more money. Another interesting part of this Budget was that in its Economic Survey, the government, discussed the problem of unemployment in detail, and suggested some solutions. They said that till 2030, they'll need to create 7.85 million jobs every year, On page 158 of this report, they admitted that every one out of two Indian graduates, is unemployable because they lack sufficient skills. According to CMIE data, the unemployment rate in the 20-24 age group, reached 44.49% in early 2024. This report talks about Artificial Intelligence too. It mentions how Artificial Intelligence leads to a lot of uncertainty. And at every skill level. Irrespective of low-skill level worker or high-skill level worker, there's uncertainty about everyone's job with the advent of AI. It clearly mentions that "(AI is the) biggest disruption for the future of work." Friends, if you want to upskill yourself, in the field of Artificial Intelligence, I'll recommend my ChatGPT course. This is a 5.5-hour-long course, where I've explained the theory and practical of AI Chatbots. In it, you will learn how while studying or working, you can increase your productivity and efficiency manifold, with the help of this course. The Chapter 4 talks about its personal use cases. of how you can use it for your health and household chores. Chapter 5 is for business owners, where you will learn how to use it for marketing and listing your business. As well as for market research and customer feedback management. Not only this, I keep adding new lessons to this course regularly. Those of you who have already purchased this course, will receive these updates completely free of cost. In the latest update, I've added Chapter 8 of this course. The first four lessons of the chapter are already live. And you'll receive four more lessons next month. You can see some of the reviews on screen, of how helpful this course was for people who sincerely followed it. If you are interested, use the coupon code LEARN43 to get 43% off applicable for the first 1,000 people. The link is in the description below, Or you can scan this QR Code too. Now, getting back to our topic, if you aren't supposed to invest in the market, you have other assets like gold and property. These are known as Non-Financial Assets. Whether it is a piece of land, a house, or an apartment, the LTCG tax imposed on Non-Financial Assets, at the first glance, it seems like the government has reduced it actually. Earlier it used to be 20%, now it is only 12.5%. You might think it's good news. But along with this, the government has removed the indexation benefits on it. Indexation means that the capital gains tax on your property's transaction will be computed after accounting for inflation. That is, if you had bought a house worth ₹2 million 20 years ago, by adjusting inflation, today, the value of that ₹2 million, is ₹6 million, then you will have to pay a lower LTCG tax because ₹6 million will be considered your baseline or cost of acquisition. That will be used to calculate your present day profit. This is called indexation. But if indexation is removed, then the ₹2 million you paid, will be taken as the cost of acquisition without inflation, that will be the baseline, and you will have to pay LTCG tax on the entire extra amount. One reason why the government is doing this can be that the government does not want speculation in property prices. Do you remember this Manoj Tiwari interview? "The value of every house in this area, has increased twofold." Manoj Tiwari gave an interview during the elections, where he was happily saying that after Modi 3.0 he would increase the value of properties in his constituency by 2 to 3 times. -"But this will be wrong." -"Why?" "Because if someone migrates from the East, they won't be able to afford these houses." "Maybe I'm getting confused a bit." For people like Manoj Tiwari, this would be beneficial. People who have so much money that they could buy multiple properties, and they sell these properties for their businesses, they get huge profits from this. But what he forgot to consider is that the lower middle class people who do not own properties, who want to buy a house for themselves, who want to buy their first home, this will negatively affect them. Because from their perspective, the property prices are increasing so much that they cannot afford to buy a house. Here too, when property prices become overvalued like this, it is known as a Real Estate bubble. So the government wants to discourage investment in property. But whether you will benefit or not from this, depends on your personal situation. Because there are numerous rules that have to be considered. Like the government has made a rule that if you bought your property before 2001, then you will get the indexation benefits. But after that, you won't. Now the exact benefit of this tax reduction, decreasing it from 20% to 12.5% and the loss from the removal of indexation benefit, whether you will benefit or lose from it overall, let's understand this with an example. Assume that you paid ₹2 million for a property in 2004. Adjusting the cost for inflation, the value of that ₹2 million would be ₹6.42 million today. How was this calculated? By deciding the CII value. CII is the Cost Inflation Index which calculates the annual inflation of asset prices. Every year, the Income Tax Department publishes the CII numbers and 2001 is taken as the base year. In 2004, when you bought the property, the CII value was 113 and 2024's CII value is 363. 363 divided by 113 is 3.21. And if we multiply this number with your cost of ₹2 million, to calculate the inflation-adjusted value of your house today. Now, how much does this house sell for? According to the Centre for Social and Economic Progress studies, housing prices in India have increased by an annual rate of 9.3% between 1991 and 2021. If we assume this trend, then the selling price of this house will be ₹12.4 million in 2024. That means you bought a property in 2004 for ₹2 million, and you are selling this property in 2024, for ₹12.4 million. First, let's compute your tax obligation under the old system. Indexation will be considered under the old system, so ₹12.4 million minus ₹6.42 million will be approximately ₹6 million. On this, LTCG tax will be levied at 20%, which will be around ₹1.2 million. But under the new system, there are no indexation benefits, so ₹12.4 million minus ₹2 million, will be ₹10.4 million. On this, the new LTCG tax will be levied at 12.5%, which will result in your overall tax obligation of ₹1.3 million. This is a realistic example with realistic prices. In this specific case, you can see that there is a loss of about ₹100,000 because of the introduction of the new system. Many people have expressed their concern that because the new system is so detrimental, people will start dealing in cash to save tax, which will result in increased circulation of black money. And the ones who stand to lose the most will be those who have invested in delayed projects in the last 23 years. There are many housing projects and societies where people bought apartments that weren't built. They got delayed for 5-10 years. And unless the price of those properties increase drastically, these people will suffer even more losses. The only benefit of this policy that the government can expect is that the speculation in property prices will reduce. Property prices will not increase exponentially. And perhaps the lower middle class people will get a chance to afford a house. Next, we come to Angel Tax, the tax that is imposed on start-ups whenever they issue fresh shares at a higher price than the fair market value of their company. In the new budget, the government has proposed to remove this tax. This is a good decision. In fact, this decision was praised by opposition parties as well. Congress leaders claim that they were demanding this for a long time and in fact, it was written in their manifesto too. Talking about Income Tax, there were minor changes in it, that will be beneficial for the middle-class on a small scale. For example, the Standard Deduction has been increased from ₹50,000 to ₹75,000. There were some changes in the slabs too. Earlier, annual income of ₹300,000-₹600,000 was taxed at 5%. Now, up to ₹700,000 you will need to pay at 5%. Similarly, the 10% tax rate slab was for an annual income of ₹600,000 - ₹900,000. Now, it will be for ₹700,000 to ₹1 million And 15% was charged for ₹900,000 - ₹1.2 million Now, it will be for ₹1 million - ₹1.2 million. The remaining tax rates have not changed. How much will you benefit from this exactly depends on your deductions under Section 80D, 80TTA, and 80TTB. Your exact annual income. But generally speaking, for a middle-class citizen, this will provide a negligible benefit. If you compare this step with the previous governments', with this interesting chart published by the Mint. Between 2006 and 2012, the number of times the 0% and 20% slab rate was increased to help the middle-class. But these slabs weren't changed by the government in the last 12 years. It is a similar scenario for the Capital Gains tax too. Did you know that in 2004, when Dr Manmohan Singh became the PM, the LTCG tax was at 0%? It was only in 2018, that the Modi government reintroduced this tax. This has now been increased to 12.5%. This is another major issue on which the government is criticised. because if your annual income is more than ₹1.5 million, then the maximum tax rate for you will be 30%. But on the other hand, if someone else earns more than ₹10 million, the same 30% tax rate is applicable. While in reality, one of them is a proper millionaire while the other is only a middle-class or upper middle-class person. Numerous times people and opposition parties have called the Modi government as Adani-Ambani government. This is the reason behind that. It seems like the government squeezes the middle-class for every penny, while their millionaire and billionaire friends, are given benefits after benefits. This is evident in another data point. In the Budget document we can see that of the revenue of the government 19% is from Income Tax, 18% from GST, and merely 17% is from corporate tax. Look at this graph, it wasn't always like this. Before 2014-15, the majority share of government's revenue was actually from corporate tax. That is, the tax imposed on the companies. Slowly, the government has been reducing corporate tax over the years. Instead, it has focused more on collecting taxes from the income tax payers. The Finance Minister has talked about 5 schemes for which they've set aside an outlay of ₹2 Trillion. First is the First Time Employment Support. Those who join their first job and are registered with the Government's EPFO, can get up to ₹15,000 from the Government. Second, in the manufacturing sector, specifically, it has provided for more benefits to both the employees and employers. Third, Employer Support has been provided to encourage employers to hire more employees, and the government will contribute up to ₹3,000 per month for two years in the EPFO on behalf of the employers. Fourth, the government has promised to launch a Skilling Scheme to help 2 million youth to become skilled in the next five years. The fifth and most interesting scheme, the government has promised to provide internship opportunities for 1 million youth in the top 500 companies for 12 months. This point is interesting because the same thing was mentioned in Congress's manifesto. Providing internship opportunities in top companies. This scheme was favoured by both parties, and is a positive step. Now, it remains to be seen, if and how well will these schemes be implemented. You can already see such statements by the Finance Minister from 24th July, that the Job Schemes will not be compulsory for companies, rather, they would be merely a nudge. How many companies will actually implement these? That is a major question. Apart from this, sectors like Roadways, Railways, Education, and Healthcare, and their budget allocations, has been discussed in my previous video, when the government announced the Interim Budget in February. You can go watch that video. And finally, we come to the last point which is again being criticised a lot is the distribution of money among different states. In this budget, the government took special notice of the states of Andhra Pradesh and Bihar and allocated a lot of money for them, in comparison to other states. ₹150 billion have been allocated for the capital of Andhra Pradesh for the development of Amravati. Though the Andhra Pradesh elections are over, elections in Bihar are yet to be held. So, the budget allocation for Bihar is at the next level. The government will spend ₹600 billion on different infrastructure projects in Bihar. Building expressways, power plants, heritage corridors, new airports, and ₹115 billion are being given to the state, for flood mitigation. Apart from this, under the Tourism Budget, Bihar will be getting the biggest share. Vishnupad Mandir of Gaya and Mahabodhi Mandir in Bodh Gaya, will be given world-class facilities and tourism infrastructure, as per the Finance Minister. It is extremely clear that BJP in its minority government, is doing its best to appease its allies TDP and JDU by allocating so much money to these two states. This is why the Leader of Opposition, Rahul Gandhi called this budget a Seat Conservation Budget. In the past, the BJP government used to favour the states of Gujarat and Uttar Pradesh like this. While the other states were ignored. But now the focus has shifted to Andhra Pradesh and Bihar. Many memes were made about this as you can see on the screen. As a conclusion, I would like to show you this chart of the growing income inequality in our country. Here, you can see how over the years, the rich have become richer and the poor have become poorer. And in the last 10 years, in fact, in the last 20 years, this situation has kept on worsening. The share of the top 10% in our country's income kept on increasing, while the middle-class's share kept decreasing. To address this issue, it's important that the government focuses on the growth of the middle-class. Small businesses needs to be promoted instead of promoting large corporate companies. Their billionaires friends should be taxed more instead of the middle class people. I fail to understand the problem of why the government cannot tax the billionaires more. In their ₹50 billion weddings, maybe they'll spend ₹1 - ₹2 billion less. They won't be able to afford 1 or 2 airports across the country and we might be able to save 2-3 jungles. What's the harm? Look at this article, friends. The income inequality in our country hasn't been so bad even during British rule. Can you imagine that? Only the future will tell us if these new government policies will make things better or worse. If you like the video, you will find the link to the ChatGPT course in the description below. And if you want to understand Artificial Intelligence better, you can click here to watch this video. Thank you very much!