Anticipating India's Interim Budget 2024: Key Expectations and Potential Boosts

As the Nation Prepares for Lok Sabha Elections, Insight into Fiscal Plans and Tax Regime Changes

As India braces for the Lok Sabha elections in April to May 2024, Finance Minister Nirmala Sitharaman is set to unveil an interim budget on February 1. While the interim nature of the budget suggests no major policy declarations, there is a buzz of anticipation surrounding potential fiscal developments.


**Anticipated Fiscal Plans:**


1. Welfare Spending and Fiscal Deficit: Forecasts hint at an increase in welfare spending, with a potential target to reduce the fiscal deficit to 4.5% of the GDP by the financial year 2025-26.


2. Tax Reduction and Rural Support:      Hopes are high for tax reduction announcements, coupled with support for farming and rural areas, emphasizing capital expenditure (capex) to address immediate challenges such as adverse weather conditions and inflationary pressures.


3. Infrastructure Focus: Expectations include a greater allocation of funds to the infrastructure segment, with a particular emphasis on fostering the growth of a digitized India, green hydrogen, electric vehicles (EVs), and broadband.


4. Food and Fertilizer Subsidies: Contemplations suggest an allocation of around Rs 4 trillion ($48 billion) for food and fertilizer subsidies in the upcoming fiscal year, addressing rising subsidy expenditures.


5. Affordable Housing Boost: Signals indicate a potential increase of more than 15% in funding for affordable housing, reaching Rs 1 trillion ($12 billion) for the financial year 2024-2025.


6. Divestment Goals: The government aims to raise Rs 510 billion ($6 billion) through divestment, signaling a strategy to sell some of its assets or investments.


**Tax Regime Changes:**


In the Union Budget 2023-24, Sitharaman introduced benefits for the new income tax regime. As the interim budget approaches, expectations for further boosts include:


1. Increase in Basic Exemption Limit: Salaried individuals hope for an increase in the basic exemption limit for both old and new tax regimes.


2. Standard Deduction, HRA, and Health Insurance: Expectations include a boost in the standard deduction limit, House Rent Allowance (HRA) exemption, and health insurance premium deduction under the new tax regime.


3. National Pension Scheme (NPS) Limit:        A recommendation to hike the limit of the National Pension Scheme (NPS) to Rs 1,00,000 for both tax regimes, potentially incentivizing individuals to consider the new tax system.


4. Deduction for Interest on Housing Loans: To make the new tax regime more attractive, extending the deduction for interest on housing loans is suggested, addressing concerns of middle-income taxpayers.


**Recap of Budget 2023 Changes:**


In the previous budget, Sitharaman adjusted slab rates for individuals opting for the new income tax regime, providing a framework ranging from no tax on income up to Rs 3 lakh to 30% tax on income of Rs 15 lakh and above. As the nation awaits the interim budget, these expectations and potential boosts will shape the fiscal landscape for the upcoming financial year.


Blogger: Umesh Mahabalashetti

The Founder of SSMDBP Business 

Technologies Bangalore.

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