New Delhi, Jul 23 Finance Minister Nirmala Sitharaman on Tuesday announced income tax relief for the middle class, a Rs 2 lakh crore outlay for job creation schemes over the next five years, and a spending splurge for states run by her party’s new coalition partners as she unveiled Modi 3.0 government’s first budget after the general elections.
With rural distress and unemployment being blamed for BJP losing its majority, Sitharaman in her seventh straight budget provided Rs 2.66 lakh crore for rural development and maintained spending on long-term infrastructure projects at Rs 11.11 lakh crore to boost economic growth.
She abolished the ‘angel tax’ for all classes of investors in startups, cut customs duty on mobile phones and gold, and simplified capital gains tax. She, however, raised the securities transaction tax (STT) on futures and options of securities, which led to the tanking of stock markets.
“India’s economic growth continues to be the shining exception (in a world that is gripped by policy uncertainties) and will remain so in the years ahead,” she said. “In this budget, we particularly focus on employment, skilling, MSMEs, and the middle class.”
Besides Rs 2 lakh crore provided over five years for schemes and initiatives to facilitate employment, skilling, and other opportunities for 4.1 crore youth, “I have made a provision of Rs 1.48 lakh crore for education, employment, and skilling,” she said.
For Bihar, where assembly elections are due next year, the finance minister announced spending of Rs 60,000 crore on infrastructure projects like expressways, power plants, heritage corridors, and new airports.
The support to Bihar, whose ruling party and BJP’s partner JD-U has been demanding an economic package and special category status for the state, is in the form of capital projects but not subsidy or cash dole.
Similarly, for Andhra Pradesh, whose ruling TDP recently joined the BJP-led NDA, she allocated Rs 15,000 crore in financial aid through multilateral agencies. A similar request for support to Bihar will be expedited, she said.
For the middle class, she raised the standard deduction — a flat deduction from the total salary earned by an employee in a year before calculating the applicable income tax rate — by 50 percent to Rs 75,000 and tweaked tax slabs for taxpayers opting for the new income tax regime.
This will lead to taxpayers under the new tax regime — which offers lower rates of taxes but permits limited deductions and exemptions — saving up to Rs 17,500 in tax annually, she said.
To spur employment, the Budget provided incentives for companies, including paying for one-month salary for first-time employees, incentives at specified sales to both employees and empowering concerning their retirement fund contribution in the first four years of employment and reimbursing employers up to Rs 3,000 per month for 2 years towards EPFO contribution of each additional employee.
Also, a program to improve skills as well as internships for students and subsidized loans for higher education will be provided, she said.
India’s official unemployment rate in urban areas is pegged at 6.7 percent but private agencies put it at much higher levels.
Buoyed by robust tax collections and a higher-than-expected dividend receipt from the Reserve Bank, Sitharaman said the government’s fiscal deficit — the difference between the total revenue earned and total expenditure — will be trimmed to 4.9 percent of the GDP in 2024-25, below the 5.1 percent figure estimated in the interim budget she presented in February.
She reduced gross market borrowing marginally to Rs 14.01 lakh crore.
The Budget for the 2024-25 fiscal (April 2024 to March 2025) allocated Rs 1.52 lakh crore for agriculture and allied sectors, aid for building 3 crore affordable housing units in urban and rural areas, provided credit support to small and medium businesses, raised small loans to Rs 20 lakh for small business, proposed setting up 12 industrial parks, and provided for setting up a Rs 1,000 crore venture capital fund for space sector.
