Budget 2023: Will Nirmala Sitharaman provide some tax relief to India’s salaried class?
Income tax rationalisation remains a key demand among the salaried class as no major reforms have been announced by the government over the past few years.
Salaried individuals are looking forward to the upcoming Union Budget 2023 in anticipation that the central government will announce some important measures to reduce their income tax burden.
Income tax rationalisation remains a key demand among the salaried class as no major reforms have been announced by the government over the past few years. While an optional income tax was announced, it has proved largely counterproductive in terms of providing relief.
Salaried individuals make up the largest group of taxpayers in the country and many experts feel that the government should announce some relief measures, aimed at either making the new income tax regime attractive or lowering tax slabs under the old regime. Several appeals have also been made to increase the standard deduction of Rs 50,000, applicable under the old income tax regime.
Tax relief unlikely
While experts feel that the demands of salaried individuals are justified in the wake of slow income growth after the pandemic and rising inflation, they are not too optimistic about such announcements in the upcoming budget.
Several economists have already opined that government faces a tough challenge in the upcoming financial year, given the worsening global economic environment, and the possibility of a slowdown in nominal GDP in FY24.
Long-term growth and fiscal consolidation in focus
The key goal of the government in the run up to the general elections in 2024 would be to support the economy with a pipeline for long-term growth, while maintaining fiscal prudence.
"We expect the budget to chart a path towards some fiscal consolidation," Taimur Baig, who is also a managing director at DBS, told news agency Reuters. He also said that much of the spending could circle around infrastructure development, which will support growth with job creation.
In addition to long-term growth, the government will also focus on bringing down its fiscal deficit in view of lower exports amid the global economic slowdown in the next financial year. A Reuters poll of economists also indicates that the government will focus more on fiscal consolidation and cut unnecessary spending to keep itself immune from external hurdles.
Even though Budget 2023 will be a crucial text for the central government before the general elections in 2024, most economists feel that Finance Minister Nirmala Sithraman will avoid higher spending and take a balanced route aimed at stabilisation. In such a scenario, the possibility of tax sops in the upcoming budget seems unlikely.
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