Budget 2023: Five Major Announcements Expected From Modi Government

Expectations are high from the last full Budget of the Modi government as the rising cost of living and worsening job market have impacted much of the middle class

The central government is reportedly considering lowering rates under its voluntary income tax framework and could introduce revised slabs in the forthcoming Union Budget. ( Image Source :Canva )

Finance Minister (FM) Nirmala Sitharaman is set to present the annual Union Budget 2023 on February 1. Expectations are high from the last full Budget of this government as the rising cost of living and worsening job market have impacted much of the middle class. Recently, the finance minister said that she understands the pressures of the middle class as she too belongs to the same strata.  

Here are five major announcements expected from FM Nirmala Sitharaman.

Lower Income Tax Rates

The central government is considering lowering rates under its voluntary income tax framework and could introduce revised slabs in the forthcoming Union Budget, Reported Reuters on January 20, citing two government sources. FM Sitharaman is anticipated to reduce income tax rates and offer updated slabs. With the exception of the recent implementation of a concessional income tax scheme, the tax slabs have not changed since the Budget 2016–17. 

Hike In Income Tax Basic Exemption Limit

There are several expectations of taxpayers that include a standard deduction hike, and an increase in Section 80C exemption besides income tax relief. Experts have expressed hope that the finance minister will offer taxpayers more disposable income to spur spending that will aid the economy. The basic exemption level should be raised to Rs 5 lakh from Rs 2.5 lakh, according to experts. Also, the present Rs 3 lakh minimum tax exemption level for senior citizens (60 to 80 years of age) should be enhanced to Rs 7.5 lakh. 

Tax Exemption On Home Loan, Increase Limit To Rs 3.5 Lakhs

The housing sector has a multiplier effect on the economy, it employs one of the highest labour in the unorganised sector. According to experts, the government may club the interest and principal payment on home loans under Section 24(b), thus increasing the limit from Rs 2 lakh per annum to Rs 3.5 lakh per annum. Presently, an individual can claim a maximum of Rs 2 lakh exemption per financial year on a home loan for a self-occupied property. 

PLI Scheme For More Sectors

The Centre reportedly could extend fiscal incentives for the production of toys, bicycles, and leather and footwear in the upcoming Union Budget as it looks to expand the production-linked incentive (PLI) scheme to cover more high-employment potential sectors. The government has already rolled out the scheme with an outlay of about Rs 2 lakh crore for as many as 14 sectors, including automobiles and auto components, white goods, pharma, textiles, food products, high-efficiency solar PV modules, advance chemistry cell and speciality steel.

Infrastructure And Welfare Schemes 

Increased spending on infrastructure is also expected in this year's budget. This will be the Budget ahead of the 2024 general elections, the government is expected to allocate more funds for infrastructure projects and social sector welfare schemes.  

Wall Street major Goldman Sachs is a report that said that welfare spending before the general elections, the reduction of subsidies as commodity prices have declined from previous highs, incentives for promoting manufacturing in India, continuing the infrastructure build-out and a higher allocation for defence. 

"Given the general elections scheduled to take place in 2024, we expect the government to increase rural and welfare spending as seen in pre-election budgets in FY09, FY14, and FY19. In FY24, we expect current expenditure (excluding interest and subsidy) to be at 7.3 per cent of GDP. Rural employment and housing are likely to be in focus," it said.