New tax regime will boost disposable incomes: FM

In her response to the discussion on the Union budget in the Lok Sabha on Friday, the finance minister said the government chose the path of increasing capex to ensure the revival of the Indian economy as it had a significant multiplier effect. She emphasized that India will continue to be the fastest-growing major economy.

Stating that the budget focused on the middle class, employment generation, MSME, agricultural sector, rural population, health and green growth, Sitharaman countered allegations from the opposition that allocations for subsidies, including food, had been reduced for the coming financial year.

“The new tax regime is very attractive; no tax for those with income less than ₹7 lakh…since the enhanced rebate limit is unconditional, it will greatly benefit income earners in the lower tax brackets as they have higher disposable income in their hands for meeting their essential expenditure,” the finance minister said.

According to the new tax regime, no tax would be levied for income up to ₹3 lakh. Income between ₹3 lakh and ₹6 lakh would be taxed at 5%, ₹6 lakh and ₹9 lakh at 10%, ₹9 lakh and ₹12 lakh at 15%, ₹12 lakh and ₹15 lakh at 20% and income of ₹15 lakh and above will be taxed at 30%. She noted that standard deduction for salaried under the new regime will reduce tax liability.

She said the government had chosen to increase capex to revive the economy as it has a great multiplier effect, even as she described the Union budget as a “tight measure” and “delicately balanced” exercise, which also ensured that fiscal prudence was maintained without compromising on India’s growth potential and sustaining the growth momentum.

“The budget balances the requirement for India’s development imperatives within the limits of fiscal prudence. So, that is a very difficult balance. Fiscal prudence is maintained as announced in the fiscal glide path we had given two years ago,” Sitharaman said.

“India was still the fastest growing major economy and will continue to be so in the years to follow,” Sitharaman noted, and said that the government, along with the RBI’s monetary policy, had taken several pre-emptive measures by November-December of 2022, due to which inflation came down and was now within the tolerance band for inflation of 4-6%.

Sitharaman countered Opposition allegations that food subsidy has been cut, saying it has been almost doubled to ₹1.97 trillion and that the government insulated farmers from rising fertilizer prices in global markets by increasing subsidies. The fertilizer subsidy was raised to ₹2.25 trillion for the current fiscal from the budget estimate of ₹1.05 trillion. The fertilizer subsidy during 2015-16 to 2019-20 ranged between ₹65,000 crore and ₹80,000 crore.

She also countered allegations of states’ resources being reduced and said that allocation had been raised rather than being cut. The total resources to be transferred to the states, under BE (budget estimate) FY24, is estimated to ₹17.98 trillion, more than ₹1.55 trillion over RE (revised estimate) of FY23 and was ₹2.91 trillion more than the actuals of FY22, she said.

Sitharaman noted that the government has always kept the interest of states in mind while highlighting the ₹1.3 trillion interest-free capex loan for three years earmarked in the budget and said that states would be partners in the massive capital expenditure exercise.