New Delhi

India's finance minister Nirmala Sitharaman presented the country's budget for the financial year 2024-25. Beyond the numbers, let’s focus on the middle class.  

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Should the middle class be happy? 

In the backdrop of budget 2024, India's income tax landscape underwent some adjustments aimed at reshaping fiscal policies affecting middle-class taxpayers. 

While finance minister Nirmala Sitharaman introduced revised income tax slabs under the new regime, she also announced marginal benefits like an increased standard deduction from Rs 50,000 to Rs 75,000, but expectations for a more substantial rise to Rs 1 lakh were unmet. This decision, alongside unchanged tax slabs in the old regime, has sparked mixed reactions among taxpayers and financial experts alike. 

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Despite these adjustments, a significant portion of taxpayers opted for the new income tax regime in FY24, reflecting a preference for lower tax rates despite fewer deductions and exemptions. But when it comes to taxes, there really is no relief. 

While the middle class may benefit from a higher standard deduction limit, changes in capital gains taxation is bad news for investors sitting on profits. Short-term capital gains on certain assets will be taxed at 20 per cent and long-term capital gains will increase to 12.5 per cent, while exempting gains up to Rs 1.25 lakh annually. Mutual funds investors will also be taxed at a higher rate when they sell their holdings. 

The measures aim to simplify tax compliance and boost government revenue. But concerns linger over the impact on taxpayers with substantial gains from asset holdings and the shortfall of relief measures for the middle class. The corporate tax rate reduction from 40 per cent to 35 per cent aims to stimulate business growth, yet the absence of broader tax relief for the middle class remains a focal point of discussion among economists and taxpayers. 

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Let us now look at some other hits and misses that concern the middle class. 

Education, job creation, and investments in precious metals like gold and silver are highlighted as wins, along with improved rail connectivity and support for religious tourism. 

However, there's disappointment over the absence of substantial consumption incentives and the drying up of indexation benefits for property sales. 

Indexation benefits in the context of property sales refer to adjusting the purchase price of an asset for inflation before calculating capital gains tax, which raises the question if investment in property is still lucrative for the middle class. Funds for promoting mobile payments have also been reduced, and allocations for enhancing air connectivity have been trimmed. 

Overall, while there are strides in certain areas like housing under PMAY(U), the budget leaves gaps in boosting consumer spending.