Budget 2024: What’s in store for middle class this time?

India's middle class will be eagerly waiting for some announcements from the Modi government in its Interim Budget 2024 before the much-anticipated General Elections in April-May 2024. Though Finance Minister Nirmala Sitharaman has clearly stated that there won't be any firecrackers in this year's budget, it's likely the government will take steps to tackle key challenges i.e. inflation and some more reforms in the areas of income tax. Both of these directly have an impact on the middle class of the country.

Experts agree the upcoming General Elections may lead to some populist schemes being included in the Interim Budget 2024-25. Since the corporate income tax rate cut in Sep’19, there has been a continuous demand to reduce “personal income tax rates” as well. "The new tax regime can be made more attractive by either increasing the exemption income limit, raising the income tax rebate under Section 87A or by reducing the highest surcharge rate; and 3) some incentives to further boost the residential or commercial property market," experts at brokerage Motilal Oswal says.

Another brokerage Sharekhan in its pre-budget analysis says the government has been successful in taking adequate measures to curtail inflation for six to eight months in the backdrop of an uncertain environment. Despite that, consumer sentiments, especially of the rural population and middle/lower income group, continue to remain “weak”, affecting consumption growth.

“In the Interim Budget 2024, the government might take some adequate measures to improve consumption in the near term. To increase the income in the hands of salaried people, the government might provide some interim tax relief by increasing the standard deduction limit from the current Rs. 50,000 (not changed for the last five years),” says PNB Paribas-led brokerage major.

There are expectations that the government may increase outlay towards the PM Kisan Scheme as well, which will likely boost consumption in the rural sector. Economists also suggest that the government may also focus on measures towards creating jobs in various sectors.

Axis Securities in its pre-budget expectations says the government may green light a “new housing loan scheme” tailored for the urban poor and middle class, offering loans up to Rs 50Lc with interest subvention.

During last year's budget, the FM made five major announcements for the benefit of the hard-working middle class. First, she increased the rebate limit to Rs 7 lakh in the new tax regime, which allowed those in the new tax regime, with income up to Rs 7 lakh, to not pay any tax. The second measure was related to the change in the tax structure in the new tax regime by reducing the number of slabs to five and increasing the tax exemption limit to Rs 3 lakh. Thirdly, she extended the benefit of the standard deduction to the new tax regime, which allowed each salaried person with an income of Rs 15.5 lakh or more to benefit from a standard deduction of Rs 52,500. Also, the FM announced reducing the highest surcharge rate from 37 per cent to 25 per cent in the new tax regime. In line with the increase in government salaries, she also increased the limit on leave encashment on the retirement of non-government salaried employees to Rs 25 lakh.