Every year, as the Union Budget presentation approaches, and it again lits rope of expectations of the middle class people. It is a fact that not all budget sessions have provided significant benefits to taxpayers.
As Budget 2024 draws near, taxpayers are looking forward to potential updates on exemptions and deductions. With the current government’s focus on a new tax structure that offers fewer exemptions, people are adjusting their expectations for the upcoming budget.
Neeraj Agarwala, Director at Nangia Andersen, noted that…..People who earn between Rs 5.5 lakh and Rs 15 lakh are the ones who file the most income tax returns and contribute about 18% of the total income tax collected. This group of middle-class earners faces high tax rates, ranging from 20.8% to 31.2%.
Despite paying these high rates, they have limited tax benefits. For example:
– The standard deduction they can claim on their salary is only Rs 50,000.
– The amount they can deduct for interest on home loans is capped at Rs 2 lakh per year.
– The exemption on long-term gains from selling equity shares is just Rs 1 lakh, which many feel discourages people from investing.
In short, while this income group pays a significant amount in taxes, the reliefs available to them are quite limited.
Recent figures from the Income Tax department show that India’s total direct tax revenue increased by 19.54%, reaching Rs 5.74 lakh crore by July 11, 2024. Specifically, personal income tax collections went up by nearly 23%, amounting to Rs 3,61,862 crore, which is higher than last year’s numbers. This growth is a good sign for the country’s tax revenue.
Also Read: Budget 2024: Why Is A Common Man Interested? Taxpayers Majorly Teased
Additionally, for April and May, India’s fiscal deficit—essentially the gap between what the government spends and earns—was about 3% of the annual target for the fiscal year 2025, totaling Rs 50,615 crore. This improvement in finances is partly due to a large transfer of Rs 2.1 lakh crore from the Reserve Bank of India (RBI) in May. This transfer has strengthened the government’s financial situation and given it more room to manage its budget.
The interim budget announced on February 1, 2024, projected that income tax collections would reach Rs 11,56,000 crore in FY 2024-25, a 13% increase. The revised estimate for FY 2023-24 is Rs 9,00,575 crore, reflecting a 13.5% increase from the original budgeted amount.
What is that Middle class eyes glitters for?
– Higher Standard Deduction: The upcoming budget is expected to increase the standard deduction, providing relief to middle-income earners.
– Restructured Tax Slabs: A possible revision of tax slabs could create a more balanced tax system for middle-income individuals.
– Guaranteed Pension Benefits: The budget might introduce measures to ensure a stable pension plan for National Pension System (NPS) participants.
– Incentives in the New Tax Regime: Additional incentives are likely to be added to the new tax framework to make it more attractive and encourage compliance.
– Support for Homebuyers: There may be increased support for middle-class homebuyers, including schemes to make homeownership more accessible.
