Highlights for Fintech, BFSI & IFSC (Gift City) in Budget 2024

Vaibhav Rathi

30 Jul, 2024

India’s financial sector is changing due to advancements in technology and new regulations. GIFT City, India’s first International Financial Services Centre (IFSC), is leading this transformation.

GIFT City is ready to become a world leader in financial technology innovation due to its modern infrastructure and favourable regulatory environment. By emphasizing innovation and teamwork, IFSC seeks to unbind the complete capabilities of the FinTech community.

What are the Key Updates for the Fintech Sector?

Digital lenders focusing on MSMEs aim to utilize credit guarantee schemes to better reach smaller businesses. They are optimistic about strengthening their interaction with banks and NBFC to support the government’s emphasis on unsecured MSME credit.

Below, we have mentioned some of the key takeaways for the fintech sector from Budget 2024, such as:

• The updated tax brackets will increase disposable income and consumer spending by saving taxpayers a maximum of Rs 17,500. The rise in credit demand is advantageous for fintech lenders as it allows them to grow their clientele.
• Enhance credit availability for small businesses, support fintech firms offering loans, and raise MUDRA loan caps from Rs 10 lakh to Rs 20 lakh.
• Extending ESOP benefits aims to lower taxes for employees, aiding startups in retaining talent.
• Reducing the compulsory TReDS registration limit to Rs 250 crore instead of Rs 500 crore will enable a greater number of MSMEs to utilize invoice discounting services, enhancing their cash flow control. This will create new opportunities for fintech platforms that focus on invoice discounting to expand.
• Increase access to digital financial services in unprivileged and remote areas to enhance financial inclusion.

Note: The growth of the fintech sector is increasing the opportunities for fintech business enthusiasts. Thus, the numbers are likely to rise in the forthcoming period. For NBFC Registration, AIF registration, and other registrations, take expert guidance.

What are the Key Updates for the Insurance Sector?

According to the proposed budget for 2024, the payout from your life insurance policy will increase due to the reduction in the TDS rate to 2%. According to an explanatory memorandum of budget 2024, the suggestion is to lower the TDS under Section-194DA of the Act from 5% to 2%.

Below are the key takeaways for the insurance sector from Budget 2024 such as:

• The TDS rate on life insurance claims dropped to 2% from 5% starting on Oct 1, 2024, while the TDS rate on insurance commissions was lowered to 2% effective Apr 1, 2025.
• This alteration is intended to enhance liquidity for policyholders.
• The budget suggests the implementation of composite licenses for life insurance companies to offer health and general insurance, boosting competition and diversification of products in the market.
• Streamlined single registration process for insurance intermediaries to lessen regulatory requirements.
• More stringent regulations were implemented to curb abuse of tax write-offs by life insurance firms (in effect as of April 1, 2025).
• Supporting sustainability and growth through specialized insurance products for renewable energy and agriculture is encouraged.
• Prohibit life insurers from deducting non-business expenses from the tax code.

Insurance businesses must meet their IRDA Compliance needs to streamline their operations and contribute to the growth of the Indian economy.

What are the Key Updates for the Banking Sector?

Public sector banks will establish their ability to evaluate MSMEs for loans instead of depending on outside evaluation services. They will create a new credit assessment model based on scoring the digital footprints of MSMEs in the economy.

Below are the key takeaways for the banking sector from Budget 2024 such as:

• Accelerated privatization of certain state-owned banks to enhance productivity and competitiveness.
• Additional funding is allocated to public sector banks to enhance financial positions and facilitate loan provision.
• Encourage the use of technology in banking to improve customer service and effectiveness.
• The GNPA ratio decreased to 2.8% (the lowest in 12 years), indicating improved credit control and an economic rebound.
• Enable organizations such as SIDBI or NABARD to offer liquidity assistance to NBFCs.
• It is anticipated that bank credit will increase by 15% every year as a result of economic recovery and better balance sheets.

What are the Key Updates for the IFSC?

The Finance Minister, Nirmala Sitharaman, declared tax benefits for retail schemes and ETFs established in the International Financial Services Centre (IFSC) Gift City. After the modifications, these plans will now benefit from tax breaks comparable to those of category III Alternative Investment Funds (AIFs) established in the IFSC.

Below are the key takeaways for the IFSC sector from Budget 2024 such as:

• Adding fintech, green finance, and aircraft leasing services to the IFSC activities will enhance GIFT City’s attractiveness on a global scale.
• Proposal to provide tax relief for retail funds and ETFs established in IFSC.
• Relax rules for IFSC entities by streamlining capital requirements, investment regulations, and compliance procedures to promote a more favourable business climate.
• Income from the central Settlement Guarantee Fund established in the IFSC will not be subject to taxes.
• Allocate resources to improve GIFT City’s infrastructure, office spaces, housing, and transportation for increased business appeal.

What are the Key Updates for the Capital Gain Tax?

In the Union Budget 2024, tax rates for long-term capital gains (LTCG) and short-term capital gains (STCG) were adjusted by Finance Minister Nirmala Sitharaman on July 23.

Below are the key takeaways for the capital gain tax from Budget 2024 such as:

• Tax is charged at a rate of 20% on specific assets by STCG.
• The STCG rate for other assets will continue to be unchanged.
• The LTCG tax rate for both financial and non-financial assets have been raised from 10% to 12.5%.
• This covers long-term capital gains tax on stocks, equity mutual fund units, and business trust units.
• Securities Transaction Tax (STT) is charged at a rate of 0.1% on the sale of options and 0.02% on futures.
• There is no indexation benefit available on property or gold. LTCG Tax at a rate of 12.5% applies to properties.
• The cap on exemption for long-term capital gains on specific assets has been raised from 1 lakh to 1.25 lakh annually.
• The required time frame for listed securities to be considered long-term has been shortened from 36 months to 12 months.

Conclusion

The progress in Fintech, BFSI, and IFSC at Gift City are transforming India’s financial sector. Fintech improves effectiveness and client satisfaction, while IFSC supports creativity and global cooperation. This collaboration boosts India’s status as an international financial centre, promoting progress and economic advancement.

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