India Prepares for Game-Changing Budget 2024 Amid Calls for M&A Reforms and Tax Adjustments

India is rapidly emerging as one of the fastest-growing economies in the world, with a crucial need for strong capital flows and a boost in mergers and acquisitions (M&A). As the country prepares for Budget 2024, stakeholders are anticipating reforms that can enhance the investment landscape. This budget is highly significant, particularly as it marks the first one in the government’s third term, and both investors and corporate leaders have high hopes for positive changes.

Among the desired reforms, stakeholders are aiming for a review of current valuation rules under the Income Tax Act. These rules can create problems for genuine trades between unrelated parties, exposing them to unintended taxation even when prices are confirmed through transparent methods. A clear solution to these issues is expected to protect legitimate transactions from unnecessary tax burdens. Additionally, there are calls for rationalizing capital gains tax rates and holding periods, which would allow for a more transparent and conducive trading environment.

Another key area of focus is the treatment of share swaps, which are often equated with mergers under certain conditions. Advocates suggest that these transactions should be eligible for tax deferral similar to mergers, aligning Indian laws with practices in other countries. Moreover, the financing landscape for M&A needs attention, as various legal restrictions put Indian companies at a disadvantage compared to their international counterparts. Adjustments in these areas would not only ease transaction processes but also promote higher levels of investment and M&A activity, further propelling India’s economic growth.