NEW DELHI: When Finance Minister Nirmala Sitharaman on Tuesday rose to present Budget and spelled out the key themes — employment, skilling, MSMEs, and the middle class — there was high hope that she would open the purse strings and announce some generous measures for the middle class. It was not to be. After making the early grand gestures, the finance minister stopped short of providing any big relief to the middle class. The much-expected income tax sops ended up being too tame to merit much attention. Nonetheless, those in the new tax regime did get some reasons to cheer. The FM increased the standard deduction from Rs 50,000 to Rs 75,000. The tax structure under the new regime was also tweaked a bit. The government continues to load the tax benefits in favour of the new tax regime, which according to the finance minister is opted by two-thirds of the individual taxpayers. The sops would help taxpayers save up to Rs 17,500 every year.While the income tax announcements failed to enthuse many, the increase in capital gains taxes in equities — from 15% to 20% for short-term capital gains and 10% to 12.5% for long term capital gains — was a shocker. The equity market reacted sharply with benchmark equity indices falling over 1% at one point of time. However, the markets recuperated the losses, probably taking consolation from the fact that the government has not given in to the pressure and shunned the path of fiscal prudence. The government has set a steep fiscal deficit target of 4.9% of GDP (against the 5.1% in the interim budget). “The fiscal consolidation path announced by me in 2021 has served our economy very well, and we aim to reach a deficit below 4.5 per cent next year. The government is committed to staying the course. From 2026-27 onwards, our endeavour will be to keep the fiscal deficit each year such that the Central Government debt will be on a declining path as percentage of GDP,” the FM said in her Budget speech.While the path of fiscal consolidation for the government was made easy by the bumper dividend of Rs 2.11 lakh crore given by the Reserve Bank of India. On tax revenue front as well, the government looks comfortable as it estimated an 11% growth in the gross tax collection to Rs 38.4 lakh crore. And despite some big announcements on jobs and skilling, it managed to keep its expenditure growth at 8.5% to Rs 48.2 lakh crore. This has resulted in lower gross and net borrowings than the previous year.The big feature of the budget, though, was its announcements on the jobs and skilling. The Budget has taken a cue from the Economic Survey report and acknowledged that job creation is of critical importance for the country. It, therefore, announced a slew of measures and incentives for jobs and skilling. The Finance Minister allocated Rs 2 lakh crore for five schemes and initiatives that will facilitate employment and skilling opportunities for 4.1 crore youth over a five-year period.Curiously, the government has named the job creation scheme as Employment-linked Incentive (borrowing from the Congress’ election manifesto). Major thrust has also been given on skilling with the launch of a comprehensive scheme that will provide internship opportunities to one crore youth in 500 top companies in five years.In a bold move, the government abolished the ‘angel tax’ to boost investments in the start-up ecosystem. Although the FM named infrastructure as one of the priorities, the budget allocation for capex remained unchanged at Rs 11.11 lakh crore from that in the interim budget.
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