Budget 2023-24: Key expectations in a pre-poll year
Summary
This being the last full budget before the general elections, Finance minister Nirmala Sitharaman's formidable task: boost growth and demand without diluting fiscal targets.Finance minister Nirmala Sitharaman will present her fifth consecutive budget today. This being the last full budget before the general elections, her formidable task: boost growth and demand without diluting fiscal targets. Mint summarizes the expectations:
What can individuals expect?
Ever since Sitharaman spoke of identifying with the middle class, hopes have run high that the budget will provide some tax relief to the common man. An increase in the income tax exemption limit from ₹2.5 lakh to ₹5 lakh, and in the standard deduction from the current ₹50,000, are on people’s wish-list. A hike in the Section 80C deduction limit of ₹1.5 lakh for investments in PPF, tax-saving mutual funds, national savings certificate etc., is also widely anticipated. Additional concessions in the new tax regime (announced in budget 2020) to make it more attractive are expected, too.
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Will capital gains tax be tweaked?
At present, different assets have different holding period thresholds before gains in them can be classified as ‘long term’ and taxed at a lower rate. For instance, the threshold is three years for debt mutual funds, two years for real estate and one year for stocks and equity mutual funds. There is a general expectation that the government will bring about uniformity in holding period. Similarly, the government may bring about uniformity in capital gains tax rates between different asset classes. Equity has a 10% tax on long term gains while debt mutual funds are taxed at 20% with the benefit of indexation.
What can we expect on corp. tax/indirect taxes?
Corporate tax reforms have broadly been completed but there are demands from industry to extend the concessional 15% tax rate on new manufacturing companies, which expires on 31 March 2024. Industry has sought an extension of one to five years. On GST, the Finance Bill 2023 is expected to deny input tax credits for corporate social responsibility spending.
What to expect on customs duties?
One of the enduring themes in the last few budgets has been import substitution, where customs duties have been raised to provide impetus to domestic manufacturers. This year’s budget will build on that, with the government having identified at least three dozen items for a hike in duties -- from private jets and helicopters to electronic goods, plastics, items of iron and steel, jewellery and leather. The idea is to arrest India’s overall trade deficit in general and with China in particular.
What about rural India and farmers?
Home to two-thirds of the population, rural India is looking for steps to improve incomes and push demand. To boost non-farm wages which grew sluggishly in the face of high inflation, the government is expected to allocate more funds for rural jobs, housing and roads. Though crop prices were robust, farmers are expecting an increase in the cash transfer scheme PM Kisan to compensate for rising input costs. The government is expected to provide more funds to incentivize farmers to switch to natural farming.