Budget 2024: Will the middle class rejoice today? Only FM has the answer

It’s just a couple of hours away when Finance Minister Nirmala Sitharaman will rise in Parliament to present her record seventh Union Budget today. While every year middle- and salaried-class people eagerly wait for this annual event for some respite and relaxation on tax fronts and other incentives to lead a more efficient and comfortable life, this time the situation looks much more favourable for the government to do the needful.

As highlighted by experts, this time the government has the fiscal space to either reduce tax rates or increase the exemption limits under both old and new tax regimes. The RBI's transfer of a record ₹2.11 lakh crore dividend to the central government, borrowings that are fairly under control, and encouraging tax collections give the government fiscal room this time to go for a tax cut.

The tax cut or increase in exemption limits, if they happen, will surely give a substantial boost to consumption as people will have more disposable income. Moreover, it will also lead to an increase in savings. There has been a continuous decline in savings, so it would be a welcome move.

It's worth mentioning here that a survey conducted by research agency LocalCircles has revealed that up to 48% of Indian households are facing a decline in their earnings and savings for the current financial year as compared to the previous one.

Meanwhile, trade association ASSOCHAM recently urged the government to give relief to taxpayers, mainly in the lower income groups, to increase consumption.

"Rationalise and simplify the tax system to improve compliance and promote investment. Consider measures such as reducing corporate tax rates, phasing out tax exemptions, and broadening the tax base to make the tax regime more efficient and equitable," it said.

Capital gains tax

As regards capital gains tax, there is a consensus view that there is an absolute need for these taxes to be reformed. Capital gains tax is a tax imposed on the profits earned from the sale of assets such as stocks, bonds, real estate, and other investments.

However, an increase in capital gains tax will spoil the mood, and hence, a massive correction in the markets can't be ruled out.