New Delhi: Finance Minister Nirmala Sitharaman on Wednesday said the government has made the new income tax regime more attractive for taxpayers and has brought about ‘substantial changes’ in its structure for the benefit of the middle class.
The Budget 2023-24 has proposed changes in the optional tax regime, which was introduced in 2020-21.
Speaking to reporters after presentation of the Budget, Sitharaman said this is a Budget which has beautifully balanced both growth considerations and fiscal management.
Capital investment has never seen double-digit announcement of Rs 10 lakh crore, which includes Rs 1.3 lakh crore being given to states, which is going to give a big leg up to infrastructure development, she added.
The Budget focusses on public sector continuing the good tradition of capital investment in infrastructure and also attending to MSMEs, which are the engines of growth.
So, she said, “we can sustain the capital infrastructure expenditure from the government and simultaneously in the private sector, give a push and impetus to MSMEs and not forgetting the middle class individuals who need that kind of tax breaks and relief in taxation.”
She emphasised that the macroeconomic conditions have been kept in mind and fiscal consolidation has not been kept at the backburner.
On the direct taxes, the finance minister said the country has been waiting for a regime which is simplified and easy in compliance.
“The personal income tax has had substantial changes (in the Budget) which will benefit the middle class. The new taxation regime has now got greater traction and incentive so that people can now unhesitatingly move to the new regime from old,” the finance minister said.
As per the changes proposed in the Budget, no tax would be levied on people with annual income of up to Rs 7 lakh under the new tax regime but it made no changes for those who continue in the old regime that provides for tax exemptions and deductions on investments and expenses such as HRA.
In what is being seen as a push for the salaried class to switch to the new tax regime where no exemptions on investments are provided, the finance minister in her Budget for 2023-24 allowed a standard deduction of Rs 50,000 under the new regime.
The old tax regime provides for a similar deduction and no tax on income up to Rs 5 lakh.
Sitharaman said the government wants to make the new tax regime attractive enough and compliance should not be burdensome on taxpayers. However, if someone feels the old regime is more beneficial, he/she can continue in it.
“The ultimate interest is to make the simpler (new) regime more attractive,” Sitharaman said.
Revenue Secretary Sanjay Malhotra said majority of individual taxpayers would find it more attractive to shift to the new regime.
Malhotra, however, did not give details on the number of taxpayers who have migrated to new tax regime since 2020-21.
Under the revamped new tax regime, no tax would be levied for income up to Rs 3 lakh. Income between Rs 3-6 lakh would be taxed at 5 per cent; Rs 6-9 lakh at 10 per cent, Rs 9-12 lakh at 15 per cent, Rs 12-15 lakh at 20 per cent and income of Rs 15 lakh and above will be taxed at 30 per cent.
“I propose to extend the benefit of standard deduction to the new tax regime. Each salaried person with an income of Rs 15.5 lakh or more will thus stand to benefit by Rs 52,500,” Sitharaman said.
Asked about the fight against inflation, the finance minister said both Wholesale Price Index (WPI) and Consumer Price Index (CPI) have moderated due to measures taken by the government.
“We take inflation related steps as and when things develop. So the government is sensitive to inflation and takes appropriate action when required,” she said.
In a bid to moderate prices of wheat, state-owned FCI recently announced that it will sell 25 lakh tonnes of wheat to flour mills, private traders and other bulk consumers through e-auction out of the total 30 lakh tonnes approved by the government.
On fiscal consolidation, Sitharaman said the government is on track to meet 4.5 per cent fiscal deficit target by 2025-26, as per the Fiscal Responsibility and Budget Management (FRBM) Act.
Talking about the record borrowing programme of the government, Finance Secretary T V Somanathan assured that the market borrowing number is “firm”.
The government plans to borrow a record Rs 15.4 lakh crore from dated securities in FY24 to meet its expenditure requirement to prop up the economy.
This is higher than the total borrowing of Rs 14.21 lakh crore for the current financial year ending March 31, 2023.
Somanathan also said the debt-to-GDP ratio is not unsustainable and it will come down with growth in revenue and economy.
