Budget 2023 Expectations: Middle and salaried class may get some relief in income tax, know expert’s opinion
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New Delhi : Finance Minister Nirmala Sitharaman will present the budget in Parliament on February 1, 2023. Before this, there is a relief news for the middle class and salaried employees. It is being told in media reports that in the full budget to be presented before the 2024 Lok Sabha elections, the government can give some relief to the middle class and salaried employees on the income tax front. Apart from this, there is also a possibility of increasing the scope of areas covered under the Production Linked Incentive (PLI) scheme. Renowned economist and chairman of research institute Center for Development Studies Sudipto Mandal has expressed this possibility.
Global challenges before the government
When asked about the priorities of the government in the budget in view of the current global challenges and the domestic situation, Sudipto Mandal said that definitely many global problems have come together and this has increased the economic challenges on the economy front in the country. This includes slowing economic growth, inflation and rising current account deficits coupled with insufficient employment generation. Inflation, especially core inflation (excluding fuel and food articles), continues to remain elevated. The pace of economic growth has slowed down in the first three quarters of the financial year 2022-23. We estimate that the GDP (Gross Domestic Product) growth rate in the financial year 2023-24 will be only 5.2 percent.
RBI will continue efforts to reduce inflation
Sudipto Mandal said that apart from this, the current account deficit (CAD) is also above the satisfactory level. Looking at all these things, I believe that the Reserve Bank will continue its efforts to control inflation, while special attention should be paid to economic growth, especially employment-enhancing growth and export-promoting measures in the budget. According to the Reserve Bank data, the current account deficit reached $ 36.4 billion, or 4.4 percent of GDP, in the second quarter of the current financial year, which was $ 18.2 billion, or 2.2 percent of GDP, in the first quarter April-June. CAD is mainly the difference between the total export and import value of goods and services. However, it also includes net income and (interest and dividends etc.) and transfers from abroad (foreign aid etc.), but their share is much less.
Standard deduction likely to increase
When asked about the expectation of some relief in the budget for the middle class and salaried people on the income tax front, Mandal said that in fact a large section of salaried people do not pay income tax. Only a small section of upper middle class and wealthy people pay income tax. Therefore, any change in the provisions of personal income tax will not have any effect on a large section. Furthermore, our personal income tax rates are not very high by global standards. Instead of change, it is necessary to have stability in our tax structure. So I think no significant change is expected in the income tax structure. From the point of view of taxpayers, simplification of income tax provisions through the Direct Taxes Code would be more important. It is better to simplify tax payment procedures and compliance requirements. However, it is quite possible that the Finance Minister will announce some relief by increasing exemption limits (tax slabs and investment limits) or standard deduction, he said.
Deduction on home loan interest payment
In response to another question, the economist said that the realty sector has just started coming back on track after a long period. Also, it is an employment enhancing sector. In such a situation, if the exemption limit on interest payment on home loan is increased, then it will be a welcome step. On the Production Linked Incentive (PLI) scheme, he said that the PLI scheme has boosted production in some sectors, but its benefits mainly went to large enterprises in the organized sector. I hope this scheme can be extended to more employment generating sectors. It would be better to implement the scheme for those sectors which export a major part of their production. This will help in promoting production in export areas.
Diversification of crops is necessary
Regarding the agriculture sector, Sudipto Mandal said that it is necessary to diversify the crops in the agriculture sector. Our main challenge is to promote other crops in place of high water consuming crops like rice, wheat and sugarcane. The recent attention paid to millets is welcome. If the budget announces changes in the food policy system (procurement and public distribution system) for crops like millets, pulses and oilseeds, then it will be a good step. Important provisions are expected to be made for this in the expenditure budget.
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