New Delhi: Will the budget of Narendra Modi 3.0 alter the Income Tax slabs or trim the tax rates – that seems to be the question on every middle-class lip now.
With Nirmala Sitharaman back at the helm of the finance ministry, the top item on the agenda of the entire ministry is to prepare the budget for this financial year, a significant glimpse of which was given on the interim budget of February 1 itself.
Looks remote
However, if the interim budget is any indication, there seems to be hardly any room for cheer for the middle-class for whom reduction of income tax rates or alteration of income tax slabs holds the biggest attractions in any budget.
“While presenting the interim budget Nirmala Sitharaman had said that there will be no change in tax slabs or rates in FY25. Despite the government having a weaker mandate this time, I don’t think there will be any tinkering on front,” said Himadri Mukhopadhyay, secretary, Income Tax Bar Association, Calcutta.
Mukhopadhyay, who has been an income tax practitioner for 32 years, however, pointed out that the government’s nudge to push taxpayers towards the new IT system will continue unabated.
“Please remember this year the new system has been offered as the default and if anyone wants to stick to the old system, he/she has to choose the old one. Last year, it was the other way round. It is within the realm of possibility that next year the government will phase out the old system,” added Mukhopadhyay.
Incidentally, under the new tax regime, there will be no tax liability for anyone earning up to Rs 7 lakh a year.
“I do not propose to make any changes relating to taxation and propose to retain the same tax rates for direct and indirect taxes…” the minister had said in her budget speech.
Growth and jobs
While taxes certainly hold the immediate attention of the middle class, the focus of the budget and spending patterns are significant in the medium to long term, since it is significant for growth and job creation.
“…we think that following the loss of the majority for the BJP, we may see some changes in spending patterns in the new budget, compared with the Interim Budget,” Shreya Sodhani, regional economist, Barclays mentioned in a note.
The Barclays economist thought that the government would continue its emphasis on capital expenditure on infrastructure, which led to the elevated growth rates of the GDP over the past few quarters.
The economy grew at 7% or more in FY22, FY23 and FY24. It is also projected to grow at 7.2% in FY25.
One of the finance minister’s primary responsibilities will be to ensure that this rate of growth triggers increase in the number of jobs for the country’s youths.
Social sector in focus
Experts also thought that some expenditure would rise in the social sectors, especially the ones that target the rural population since raising income levels in the villages could move higher up on the agenda.
Incidentally, on June 4, the day of counting, fast moving consumer goods stocks were on an upswing completely against the market with both the major indices Sensex 30 and Nifty 50 tanking by about 6%. Stocks such as Tata Consumer Products, Dabur, Marico, Britannia surged on that day.
Jimeet Modi, who is the CEO of Samco Ventures recently said that the FMCG stocks are undervalued and represent buying opportunity. These would be “rising star for some time to come”, he remarked.
Higher social sector spending would put more cash in the hands of rural people which can spur growth in revenue and profits for the FMCG sector. It could also trigger demand in two-wheelers, tractors, housing and even small consumer loans.
Income tax rates and tax slabs are the immediate key attractions of any budget. Growth of the economy and employment will also be in medium-term focus when the FM presents the budget in July. Economy Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
