Given the weaker mandate and the substantial dividend of Rs 2.1 trillion for FY24 from the Reserve Bank of India (RBI), Prime Minister Narendra Modi's government is expected to lean towards populism as it gears up to present the budget for the financial year 2024-25 on July 23. However, experts suggest that significant tax relief for the middle class may not be the main agenda.
Himanshu Kohli, Co-founder of Client Associates, highlighted that the government's historical approach has been to announce major policy measures outside the budget. He emphasized that while there are positive expectations surrounding the upcoming budget, especially in terms of growth-oriented and reform-focused policies, major tax relief for the middle class may not materialize.
Kohli further noted that fiscal prudence is likely to be maintained, with a potential reduction in the fiscal deficit target from 5.1% to 5%, as indicated in the Interim budget. The substantial dividend transfer from the RBI will also aid in fiscal consolidation.
Sandeep Agrawal, Director and Co-Founder of Teamlease Regtech echoed similar sentiments regarding the tax structure. He suggested that given the recent changes in the tax framework in the 2023 budget, significant alterations might not be forthcoming in the upcoming budget. Instead, Agrawal anticipates measures aimed at enhancing Ease of Doing Business (EoDB) and possibly progressing towards implementing the Direct Tax Code.
Agrawal proposed that increasing the limits for each tax slab under the new tax regime could reduce tax liabilities for the middle class. This approach could incentivize taxpayers to opt for the new regime, thereby boosting disposable income and enhancing spending capacity.
In conclusion, while there is optimism surrounding the Union Budget 2024 and expectations of growth-oriented policies, substantial tax relief for the middle class may not be the primary focus. The government is likely to prioritize fiscal prudence and reforms aimed at fostering inclusive economic growth, while also leveraging the RBI's dividend to support fiscal consolidation efforts.
