Union Finance Minister Nirmala Sitharaman is presenting her seventh consecutive Budget today, amid hopes from the middle class for tax relief. Despite the economy growing by 8.2% last fiscal year, private consumption, which drives over half of the GDP, only rose by 4%. To boost consumer spending, the government might consider lowering personal income taxes for those with higher spending potential, particularly individuals earning between ₹5 lakh and ₹15 lakh, who are currently taxed at 5% to 20%, according to Bloomberg News.
Prime Minister Narendra Modi’s administration is expected to balance fiscal deficit reduction with tax cuts and increased welfare spending to appease allies.
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Expectations from Budget 2024-25:
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- Adjusting income tax slabs and rates to provide middle-class relief.
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- Enhancing disposable income and consumer spending.
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- Simplifying and rationalizing the capital gains tax structure.
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- Reducing complexity and improving compliance.
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- Lowering corporate tax rates, especially for MSMEs.
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- Encouraging business activity and investment.
Economic Survey Insights on Direct Taxes:
The Economic Survey 2023-24, released on Monday, estimates a 13.4% growth in gross tax revenue (GTR) for FY24, driven by a 15.8% increase in direct taxes and a 10.6% rise in indirect taxes. Direct taxes now contribute about 55% of GTR, with indirect taxes at 45%. This shift reflects the government’s push for a more progressive tax system. Additionally, tax collection efficiency has improved, with the cost of collecting direct taxes decreasing from 0.66% of gross collections in FY20 to 0.51% in FY23. The strong growth in both tax types is attributed to robust economic activity and better compliance.
PM Modi on Budget 2024-25:
Prime Minister Narendra Modi stated that the Budget for 2024-25 will outline policies for the next five years, focusing on youth, farmers, the poor, and women. He emphasized that the budget is designed to set the stage for India’s transformation into a developed nation by 2047.