The Union Budget for the financial year 2023-24 has given India’s middle class much to cheer about.
Finance Minister Nirmala Sitharaman made several big announcements today (1 February) as she presented the last full Budget of the Narendra Modi government ahead of the Lok Sabha elections next year.
Hailing the “Amrit Kaal’s first Budget”, Prime Minister Modi said it will fulfill the dreams of the aspirational society, farmers, and the middle class, reported Indian Express.
What relief has the Budget brought for India’s middle class? What are experts saying and how politicians have reacted? Let’s take a closer look.
Uptick in income tax rebate limit
What the Budget had in store for personal income tax was something as Sitharaman put was something everyone was “waiting for”.
In a much-awaited respite, the government increased the income tax rebate limit from Rs 5 lakh to Rs 7 lakh in the new tax regime.
This means that people with an income up to Rs 7 lakh will not be required to pay any tax in the new regime.
The new tax regime will now be the default tax regime, Sitharaman announced. But, taxpayers will still be able to opt for the old tax regime.
Income tax slabs changed
While the income tax slabs remained unchanged in the last Budget, the finance minister announced significant rejigs this time.
Reducing the number of tax slabs from six to five, Sitharaman raised the tax exemption limit to Rs 3 lakh.
Here are the new tax rates under the new tax regime:
For Rs 0-3 lakh income – nil
For income above Rs 3 lakh and up to Rs 6 lakh – 5 per cent
For income over Rs 6 lakh and up to Rs 9 lakh – 10 per cent
For income above Rs 12 lakh and up to Rs 15 lakh – 20 per cent
For income above Rs 15 lakh – 30 per cent
Explaining the changes, the finance minister said: “An individual with an annual income of Rs 9 lakh will be required to pay only Rs 45,000. This is only 5 per cent of his or her income. It is a reduction of 25 per cent on what he or she is required to pay now, ie, Rs 60,000. Similarly, an individual with an income of Rs 15 lakh would be required to pay only Rs 1.5 lakh or 10 per cent of his or her income, a reduction of 20 per cent from the existing liability of Rs 1,87,500.”
Standard deduction extended
The government has also extended the benefit of the standard deduction for the salaried class and the pensioners, including family pensions, in the new tax regime.
“Each salaried person with an income of Rs 15.5 lakh or more will thus stand to benefit by Rs 52,500”, Sitharaman announced.
The finance ministry said in a statement, “At present, standard deduction of Rs 50,000 to salaried individuals and deduction from family pension up to Rs 15,000 is currently allowed only under the old regime.”
The standard deduction is the portion of income not subject to tax. It is generally subtracted from the gross salary and “claimed as an exemption without having to show any proof of expenses,” as per The Times of India.
Highest surcharge rate reduced
The finance minister said India levies one of the highest tax rates on personal income which stands at 42.74 per cent.
“I propose to reduce the highest surcharge rate from 37 per cent to 25 per cent in the new tax regime. This would result in reduction of the maximum tax rate to 39 per cent,” she added.
Tax exemption on leave encashment increased
The central government has proposed to expand the limit of tax exemption on leave encashment to Rs 25 lakh on the retirement of non-government salaried employees, aligning it with the government salaried class.
Currently, Rs 3 lakh is the maximum cap that can be exempted.
Reactions to the Budget
Commenting on the various measures in the Budget aimed at bringing relief for citizens affected by inflation and job cuts, Aatur Thakkar, co-founder and director at Alliance Insurance Brokers, told Mint, “This will put more cash in the hands of individuals, which will be utilised in investments. The additional liquidity will help improve the economic scenario as well, as it will enhance overall spending. A huge impetus has been given to the youth to make strategic investments and insurance will also witness a huge boost. The money saved from tax rebates is expected to be invested into health and life insurance categories. Overall, this has been a very encouraging budget for Real Bharat”.
“The Union Budget was pragmatic, considering that the government has a tightrope between managing fiscal deficit and giving some relief to residents from high inflation. Higher capex spend, roadmap to reduce fiscal deficit and boosting consumption will provide a major leg-up to the economy, especially at a time when global growth has been hit hard by slowdown and recessionary fears. Finally, the overhauling of the income tax structure should add more money into the hands of middle-class taxpayers. That would give a boost to consumption and increase allocation towards several investment options. Overall, it would leave more people with extra money in their hands and a smile on their faces,” Srikanth Subramanian, CEO of Kotak Cherry, was quoted as saying by Reuters.
Politicians have also expressed their views on the Budget with Union minister Smriti Irani terming it a “middle-class bonanza”.
Congress MP Karti Chidambaram also welcomed the income tax cuts. “I am a believer in a low tax regime. So, any tax cuts are welcome because giving more money into the hands of the Apeople is the best way to boost the economy,” the Congress leader told ANI.
However, some in Opposition have hit out at the Centre, accusing the government of eyeing the Lok Sabha polls next year through this year’s Budget proposals.
West Bengal chief minister Mamata Banerjee said that the changes in the income tax slabs will not help anyone. “This Budget does not address India’s unemployment issue,” PTI quoted her as saying.
“There are some good things in Union Budget 2023 but there was no mention of MNREGA, poor rural labour, employment and inflation,” Congress MP Shashi Tharoor told ANI. “Some fundamental questions remained to be answered,” he added.
Delhi chief minister Arvind Kejriwal also slammed the government, saying there is “no relief from inflation in this Budget”.
With inputs from agencies