Top expectations of Indian middle classes from Union Budget 2023

Amidst rising inflation and unemployment, Indians hope for relief from the forthcoming budget

As Indian middle classes and masses continue to face the severe impact of record high unemployment and raging inflation, there are several expectations from Union Finance Minister Nirmala Sitharaman when she presents the Union Budget for the year 2023-24 later this week.

Rising inflation troubles the most

Topping the list of expectations of the middle classes is that the budget will contain measures to immediately rein in inflation that has crippled the budgets of many households for over a year. ‘‘Inflation has risen significantly over the last two three years, managing home expenditure is becoming very difficult and a reason for the worry for working middle class salaried people.  The government should make some major decisions to relieve the middleclass family by taking some proactive measures like lowering the income tax rate and change in income tax slab with no income tax on income less than INR 1 million as well as lowering of the fuel prices,’’Kundan Kumar, Senior Manager at Tata Steel, tells Media India Group.

“I am expecting the direct major step that will benefit the middle class per se. In my view the biggest support for the middle would be a major step that will help in reviving the growth and revising the employment opportunities. Now as we see that in the global world so many layoffs are happening, I think it will start getting transmitted to the domestic employment market. Given this kind of situation, the budget should focus more on growth and employment opportunities, not tinkering on the margins, so that it will help some sections of society,” Professor N R Bhanumurthy, Vice-Chancellor of Dr B R Ambedkar School of Economics University, Bengaluru tells Media India Group.

Working class hopes for changes in Income Tax rates

The structure of the income tax slab has been major concern among the working class in India. The current maximum slab of income that is not subject to income tax is INR 250,000 per annum. If the government raises this limit, it will leave more disposable income in the hands of consumers. This would then raise consumption, potentially leading to an economic recovery, say tax payers and economists alike.

‘‘I anticipate that the government will make the income tax laws simpler and more lenient for the nation’s middle class. Due consideration should be given to those working in the private sector, as organisational layoffs have become a major problem for employment worldwide. In addition, I hope the government will enhance funding for health and education,’’ Hansa Priyadarshi, who works as a project manager with an IT firm, tells Media India Group.

“There could be other ways—a lot of people are writing about it—that we are re-examining some of the income tax slabs. Now that indirect taxes are not part of the budget but the GST Council, I think the only place left for the government to look at the tax slabs is those for the people who are paying the income tax. That could be one area where they can look at direct measures for the middle class. However, other than that, I think we need to focus more on sustaining the recovery process that has been in place in the country for the last two years,” Bhanumurthy adds.

Rise in level of income exempt from any income tax has been a major demand for many years and there are speculations that with this being the last full budget before 2024 general elections, the slabs may indeed be raised in the upcoming budget.

“I am expecting the Finance Minister to give some tax rebates to the middle class by increasing the upper limit of the tax reduction. I am also expecting some reduction in the housing tax. The housing sector, small businesses, and new start-up companies would be given some tax relaxation. There would be changes in the tax rates for the richer sections of society. I also expected a higher tax rate for the affluent class of society,” Suvrokamal Dutta, an economic expert, tells Media India Group.

“I expect that there will be some reduction in duties on the essential items as well as on the items being sold at the retail outlets. We might see some reduction in the export duties as well as some reduction in the duties on the imports of specialised items and mercenaries,” Dutta adds.

Rise in tax deductions under Section 80C

The Indian Income Tax Act, 1961, which governs taxation, has many provisions for tax savings. The act lays down the rules for tax benefits for different taxpayers under Section VIA, which are in the form of deductions (80 C to 80 U). The enshrined deductions are for certain personal expenditures and social security expenditures for various purposes that aim to support economic development.

One of the most popular and widely used sections of the Income Tax Act is Section 80C which allows deduction for investments made in stock markets through mutual funds, pension funds and life insurance, besides repayments of housing loans and purchase of some government bonds.

“Section 80C includes the subsections 80CCC, 80CCD(1), 80CCD(1B), and 80CCD(2). It is important to note that an additional deduction of INR 50,000 is permitted under Section 80CCD(1B). However, the benefits of these deductions can be reaped only by individuals and Hindu United Families (HUFs). This deduction is not available to companies, partnership firms, or limited liability partnerships,” Shivani Aggarwal, a financial consultant from Delhi tells Media India Group.

“An increase in the deduction limit u/s 80C to INR 250,000 would provide savings and investment opportunities to tax payers at large, as also suggested by the ICAI in its pre-budget memorandum for 2023. It is high time to increase the deduction limit as the last increase was done in 2014-15, i.e., from INR 100,000 to INR 150,000,” she adds.

More Money for Education

Education is another key sector that has received scant attention from the government. According to the 2023 SDG4 report of the United Nations Educational, Scientific, and Cultural Organization (UNESCO), ‘‘India’s performance in upper secondary school attendance, completion, as well as learning outcomes across all segments, suffered a setback in the period 2015–2020. Nonetheless, it has made some progress in primary education.’’

“As a middle-class person, I believe the education system is a bit costly, whether it is for schooling or higher education. With rising inflation and the rising cost of education, it becomes a huge challenge to manage everything. Therefore, I expect the government to create some mechanisms to ensure quality and affordable schooling and a higher education system for the middle and lower classes,” Meenakshi Mishra, Guest Faculty, Delhi University tells Media India Group.

Adequate attention to the farmers and laborers

A large proportion of the Indian workforce is employed in the primary sector, particularly in farming and other agriculture-related occupations. The Covid-19 pandemic and rising inflation rates have severely impacted their livelihood. The incumbent government received severe backlash from farmers while implementing controversial farm laws in 2020. The Modi-led NDA government had to succumb and withdraw the farm laws after the negotiations with the protesting farmers.

“Not much attention has been provided to the farmers of Bihar. We hope that the government will pay enough attention to the plight of the farmers of Bihar too. I am expecting more subsidies for the farmers. In addition to this, getting loans from banks has been a difficult task for farmers as well as landless laborers. I hope the government will relax the process of documentation and ease the burden of getting loans. Furthermore, the government should put in place some welfare programs for farmers who have been adversely affected by Covid-19 and its aftermath,” Anant K Pandey, a farmer from Nawada in Bihar, tells Media India Group.

With a long list demands and expectations, Sitharaman will have a tough juggling act as India stares a huge fiscal deficit, a mounting trade deficit, high inflation, ever-rising inflation as well as uncertain climate that may hit the vast majority of Indians whose primary source of livelihood is farming.