As Finance Minister Nirmala Sitharaman delivered her fifth Union Budget to the Lok Sabha today, February 1, 2023, anticipation was high. She faced a challenge in keeping India’s economy as the one with the fastest rate of growth while maintaining budgetary responsibility.
Nirmala Sitharaman, the finance minister, announced on Wednesday that under the new tax system, no tax would be assessed on annual income up to Rs. 7 lakh, which will help the middle class.
She also permitted taxpayers to take a basic deduction of Rs. 50,000 under the new system, which prohibits assesses from claiming exemptions or deductions for their investments.
According to Finance Minister Nirmala Sitharaman, India will lose 350 billion rupees ($4.28 billion) in revenue by increasing the maximum on income tax exemption and lowering rates.
The finance minister stated that although the new tax system will now be the default, people can still choose to take advantage of the advantages of the previous system, which provided for greater exemptions.
She has so far largely provided to everyone, including farmers, older folks, women, and taxpayers. But everything has a price. It won’t be able to reduce the budget deficit to 5.9% of GDP if the finance minister doesn’t take money from another hand or another section. The budget fine print may contain details.
The tax bonanza has, however, been a gift for stocks, which are currently on the rise. The benchmark Sensex increased to 60,730, up as much as 2%. Bond rates are down 4 bps to 7.30%, while the currency is also up 0.2%.
All these changes genuine or just for election?
Even though all these changes seem very good right now, there is still a matter of risk. The Lok Sabha elections, which will happen in 2024 can play a major role in the Budget 2023 decisions. It is hard to tell whether the changes are genuinely made for the working class or just for vote bank. However, it seems like there is some relief for a year atleast.