Budget 2024: Middle Class Asks for Relief, Professionals Eye Growth & Businesses Seek Stability

The annual budget announcement is always eagerly awaited, but this year’s edition holds particular significance. With the full budget for FY25 set to be unveiled by Finance Minister Nirmala Sitharaman on July 23rd, the expectations are exceptionally high.  With inflation rising and the cost of living steadily climbing, the middle class eagerly seeks relief. 

Salaried professionals have their eyes set on measures that boost their savings and disposable income. Businesses, on the other hand, seek stability and support for growth. These three key segments – the salaried class, businesses, and the middle class – have their wish lists ready. Let’s delve into what each group expects from Budget 2024.

Salaried Class Seeks Tax Breaks and Incentives

For salaried individuals, the upcoming budget is a chance to secure some breathing room finally. The interim budget 2024 offered little tax relief, leaving many hopeful for substantial reforms in the total budget.

Revamping the Tax System:

• Reduced Highest Tax Rate: Under the new tax regime, experts anticipate a potential decrease in the highest tax bracket, possibly from 30% to 25%.
• Increased Standard Deduction: The current standard deduction of ₹50,000 might be increased, providing immediate tax savings.
• Tax Slab Adjustments: There is a high expectation of a revamp of tax slabs, with adjustments to better reflect changing income levels.

Beyond Tax Rates

Salaried taxpayers are also looking for additional benefits:

• House Rent Allowance (HRA) Boost: Rising rents, especially in major cities, necessitate a higher HRA exemption to offset the burden.
• Electric Vehicle Incentives: Measures to incentivize EV purchases, like tax breaks or subsidies, could encourage wider adoption.
• Affordable Housing Push: A renewed focus on affordable housing initiatives, potentially through tax breaks for developers or interest subsidies for homebuyers, could make homeownership a reality for more people.

The Middle-class Pins Hope on Increased Savings

The middle class hopes for measures that reduce their tax burden and encourage savings. Here’s what they’re looking forward to:

• Higher 80C Deduction Limit: An increase in the Section 80C deduction limit, currently at ₹1.5 lakh, could allow for more significant investment and tax-saving opportunities.
• Increased Standard Deduction: As mentioned earlier, a hike in the standard deduction would directly reduce taxable income, providing much-needed relief.
• Long-Term Capital Gains (LTCG) Relaxation: An increase in the LTCG exclusion limit from ₹1 lakh could benefit those actively participating in the stock market.

Businesses Seek Stability and Initiatives for Growth

For businesses, particularly MSMEs, the budget 2024 is an opportunity to access growth and job creation support. Here are some key areas of focus:

MSME Growth and Skill Development:

• Investment in Workforce Development: Increased funding for skill development programs like automation, AI, and data analytics can equip MSMEs with a future-ready workforce.
• Tax Breaks for Skill Development: Tax incentives for MSMEs that invest in employee training can promote a culture of continuous learning and adaptation.

The Flow of Money in the Budget

Let’s examine government finances more closely to understand Budget 2024 better. Here’s a breakdown of where the money comes from (receipts) and where it goes (expenditures) based on the expectations for the FY25 budget, building on the groundwork laid by the interim budget 2024.

Filling the Kitty: Where the Rupees Come From

The government raises money through various avenues to fund its spending. Here’s a breakdown of the primary sources:

Borrowing & other liabilities	28%
Income Tax	19%
GST & other taxes	18%
Corporation Tax	17%
Non-tax revenue	7%
Union Excise Duties	5%
Customs	4%
Non-debt capital receipts	1%

• Borrowings and Other Liabilities: This is often the most significant source of funds. The government borrows money by issuing bonds or taking loans to bridge the gap between income and expenditure.
• Income Tax: Taxes paid by individuals and businesses are a significant source of revenue. The government might adjust the budget’s tax slabs, rates, or deductions to impact this income stream.
• GST & Other Taxes: The Goods and Services Tax (GST) is a major source of income. Indirect taxes like excise and customs duty also contribute to the government’s coffers.

Spending Wisely: Where the Rupees Go

The government spends the money it collects on various programs and initiatives. Here’s a look at the significant expenditure categories:

Interest Payments	20%
States’ share of taxes & duties	20%
Central sector scheme	16%
Finance Commission & other transfers	8%
Defense	8%
Centrally Sponsored Schemes	8%
Others	9%
Subsidies	6%
Pensions	4%

• Interest Payments: A significant portion of the budget goes towards paying interest on loans taken by the government. This is a fixed expense that can limit funds available for other purposes.
• Transfer to States: The government shares tax revenue collected with state governments. This is crucial for funding state-level programs like education and healthcare. These transfers typically account for a substantial portion of the budget.
• Other Expenditures: The remaining budget is used for various government initiatives, such as infrastructure development, social welfare programs, defense, and public administration.

By understanding where the money comes from and where it goes, we can better understand the government’s priorities and the potential impact of Budget 2024. Examining how these figures compare to the interim budget 2024 can also highlight any adjustments in the government’s revenue generation and spending approach.

Real Estate Sector Seeks Reforms for All Segments:

• Affordable Housing Boost: Measures like interest subsidy programs, government strategic land use, and developer tax breaks could revitalize the affordable housing sector.
• Commercial Real Estate Incentives: Tax credits and digital transformation initiatives could incentivize the redevelopment of older commercial areas.

Focus on Education and Startup Ecosystem:

• Reduced GST on Online Learning: Lowering the GST rate on online education platforms can make education more accessible and affordable for a wider audience.
• Tax Breaks for Startup Investors: Additional tax incentives for investors in the startup ecosystem could attract much-needed domestic capital.

Revitalizing the Housing Market:

A two-pronged approach aimed at boosting both demand and supply could significantly impact the housing sector:

• Demand-Side Incentives: Introducing interest subsidy programs for homebuyers, particularly in the ₹15-75 lakh price bracket, could stimulate market activity.
• Supply-Side Measures: The government can leverage its land banks by partnering with developers to offer land and capital at concessional rates. Additionally, tax breaks for developers of affordable housing projects could further incentivize construction.

Conclusion:

Budget 2024 carries the weight of expectations for various segments of the economy. Whether it successfully delivers tax relief for the middle class, promotes business growth, and fosters job creation through skilling initiatives in the MSME sector remains to be seen. However, by addressing these key areas and implementing targeted reforms, the government can pave the way for a more stable and prosperous future for all.

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