The administration led by Prime Minister Narendra Modi is anticipated to lean towards populist measures, particularly given the weaker mandate and the substantial Rs 2.1 trillion dividend for FY24 from the Reserve Bank of India (RBI).
As the government gears up to present the budget for the financial year 2024-25 on July 23, the middle class might not receive the tax relief they had hoped for.
As the government gets ready to unveil the budget for FY 2024-25 on July 23, many are hopeful about the measures that will be announced. However, experts warn that substantial tax relief for the middle class may not be forthcoming.
Himanshu Kohli, Co-founder of Client Associates, noted that significant policy changes are usually made outside the budget presentations, suggesting that major tax reliefs are unlikely to be part of this budget.
The upcoming budget is expected to emphasize growth and reforms aimed at promoting inclusive economic progress. Kohli anticipates that the government will aim to lower the fiscal deficit target to 5% from the current 5.1% stated in the Interim budget.
The record Rs 2.11 trillion dividend from the Reserve Bank of India (RBI) is expected to aid in maintaining fiscal discipline.
While there is a general expectation of populist measures in the budget, Kohli believes that the government will also prioritize prudent fiscal management and economic growth. He notes that the substantial dividend from the RBI will support the government in its fiscal consolidation efforts.
Sandeep Agrawal, Director and Co-Founder of Teamlease Regtech, shares similar views regarding the tax structure. He mentions that significant changes were already made in the 2023 budget, implying that major alterations may not be imminent.
However, he expects new measures aimed at improving the Ease of Doing Business (EoDB) and consolidating the tax system to ensure stability.
Agrawal points out that the introduction of the Goods and Services Tax (GST) has transformed the indirect taxation system. He hopes for progress towards the Direct Tax Code, which could reduce the tax burden and simplify the tax structure similarly.
Agrawal suggests that increasing the limits for each tax slab in the new tax regime could reduce liabilities for the middle class. Enhancing the rebate limit would encourage taxpayers to switch to the new regime, thereby increasing their disposable income and boosting their spending power.
While there are positive expectations for the Union Budget 2024, it appears that substantial tax relief for the middle class might not be the primary focus. The government's emphasis seems to be on maintaining fiscal prudence and economic growth, with major tax policy changes potentially occurring outside the budget announcements.