Caught in the crossfire, Budget 2024 leaves middle-class individuals in India struggling to stay afloat.
The Budget for the fiscal years 2024 and 2025 was announced by the finance minister Nirmala Sitharaman on July 23, 2024. Ever since the speech of the finance minister has elicited mixed reactions across India, mostly about the New Tax Regime. While the government hailed it as a progressive step towards economic growth, the experts from the parliament expressed it to be a challenging phase for the middle class. The experts think that the New Tax Regime in the Budget will be challenging for the population belonging to the middle class. The middle-class people themselves are in a precarious position.
Revised tax slabs under the New Tax Regime
| Annual Taxable Income | New Tax Regime | Old Tax Regime |
|---|---|---|
| Up to Rs.2.5 lakh | Exempt | Exempt |
| Over Rs.2.5 lakh to Rs.3 lakh | Exempt | 5% |
| Over Rs.3 lakh to Rs. 5 lakh | 5% | 5% |
| Over Rs.5 lakh to Rs.6 lakh | 5% | 20% |
| Over Rs.6 lakh to Rs. 9 lakh | 10% | 20% |
| Over Rs.9 lakh to Rs.10 lakh | 15% | 20% |
| Over Rs.10 lakh to Rs.12 lakh | 15% | 30% |
| Over Rs.12 lakh to Rs.15 lakh | 20% | 30% |
| Above Rs.15 lakh | 30% | 30% |
Aims and allocations
The Union Budget 2024 presented declared on the scheduled date emphasizes nine key priorities. Each sector received allocations with a significant focus on revitalizing the economy along with ensuring successful growth for each flora and fauna of India. The total investment of 48 lakh crore for these priorities is substantial, and it is aimed at boosting the conditions in different areas, from agriculture and manufacturing to urban development.
Taxation policies
However, the middle class is left pondering how these grand plans laid by the government of India will affect their everyday lives after the incorporation of the New Tax Regime. In this context, one of the most significant concerns for the middle class is the change in taxation policies with the New Tax Regime. While the government has introduced some relief measures, including standard deduction and additional tax benefits for homebuyers and electric vehicle purchasers, this has created uneasiness.
In the finance minister’s speech, she spoke about the standard deduction, which has been increased from 50,000 to 75,000. This deduction offers some relief to salaried people receiving pensions as per the New Tax Regime. Also, first-time homebuyers, especially women, can now claim tax benefits of up to $2.5 lakh under Section 80EEA, which is significantly up from the previous 1.5 lakh for loans sanctioned until March 31, 2025. On a similar page, the tax deduction for interest on electric vehicle loans has been raised from 1.5 lakh to 2 lakh.
However, the New Tax Regime slabs have not brought the expected relief to the idle income group. The reduction in exemptions, as well as reductions along with the rise in indirect taxes on essential goods, are some of the aspects that led to a situation where the disposable income of middle-class families is likely to decrease. This change with the incorporation of the New Tax Regime put a strain on households that are already dealing with rising inflation as well as increased cost of living.
What the Opposition parties and finance experts had to say about budget reforms?
Immediately after the declaration of Union Budget 2024, there have been enthusiasts from the Opposition parties and financial experts. Let’s evaluate what different prominent figures had to say about the tax reforms and other drastic changes. Opposition parties have been vocal about their dissatisfaction with Budget 2024. Rahul Gandhi, who is the leader of the Indian National Congress, has come forward, criticizing the Budget for being “out of touch with the realities of the common man”. He argued that while the government talks about large investments in infrastructure and new-generation reforms as per the New Tax Regime has failed to address the immediate concerns of inflation.
Considering the phenomenon of inflation in India, the former finance minister and member of Lok Sabha, P Chidambaram, has added that “the broad subject is inflation, and the honorable finance minister has dismissed the subject in ten words.” He has also that, “I am not exaggerating it, please go through this page”. Questions: is inflation such a trivial subject?
Mamata Banerjee, the chief minister of West Bengal, called the budget “anti-poor, anti-people and politically biased Budget”. Her statement seems to slam the Union Budget 2024 and New Tax Regime, as it offers little amount of relief to the middle class and small businesses struggling with economic hardships. She expressed her words by saying the government’s focus on long-term projects overlooks the present state of the common people.
Further, the financial experts have weighed in on the Budget. Prominent economist Dr Raghuram Rajan pointed out that while the Budget’s vision for sustainable growth is commendable, its execution is difficult when it is imagined in real-time. He said, “The middle class needs immediate relief in the form of more sustainable tax cuts and measures to control inflation. Without these, the long-term benefits will be hard to achieve, mostly after the incorporation of the New Tax Regime.
On the other hand, Raghav Chadha, a political figure supporting the Aam Aamdi Party, has scrutinized the overall Budget. On the tax reforms, Raghav Chadha has stated that the overall tax that common people pay to the government is what they get in return. Due to his dissatisfaction, he was bound to that, “We in India today pay taxes like England to get services like Somalia”. He has expressed his grievances that despite paying a lot of taxes, the common people still do not receive sufficient services, including healthcare, manufacturing, agriculture, and education. He has also added.
What is the response Nirmala Sitharaman shared until now?
The Finance Minister defended the Budget, where she emphasized the government’s commitment to inclusive growth. In response to the raised concerns about the tax reforms and their effects on the middle class, she said, “I want to relieve the middle class, but I have limitations too. I want to give relief by reducing the tax rate, and that is why the standard deduction rate has been increased. The New Tax Regime was implemented with the aim of reducing the tax rate and has lower tax rates than the old tax regimes.
She has also highlighted the long-term vision of the Budget. “However ever I wished to give, I love to give more, but after a point, particularly when it comes to tax-related issues, that is why, to make a difference to the salaried people, I made sure that the standard deduction will go up from 50,000 to 75,000 thousand. Once the tax rates are also being changed, that will benefit even the higher taxpayers. So first of all, our intention to give something to middle-class salaried people, I increased this standard deduction”.
