What to Expect from Modi 3.0 Full Budget on July 23, 2024

The Modi government, now in its third term, faces the challenge of addressing the needs of a diverse population while maintaining economic stability and growth. Politically, the Modi administration enjoys a strong mandate but is under pressure to deliver on its promises of economic reform and development.

The government has focused on initiatives such as 'Make in India', 'Digital India' and infrastructure development, aiming to transform India into a global economic powerhouse. However, the rising aspirations of the middle class, farmers' demands, and the need for job creation remain pressing issues that the government must address in this budget.

On the financial front, the Indian economy is navigating through a period of recovery following the disruptions caused by the COVID-19 pandemic. The stock markets have shown resilience, with significant investments in technology, pharmaceuticals, and renewable energy sectors.

However, inflationary pressures and global economic uncertainties, including fluctuating oil prices and geopolitical tensions, pose challenges. The budget's fiscal policies will be crucial in steering the economy toward sustained growth while managing inflation and ensuring fiscal discipline. The full budget of the Modi 3.0 government for FY 2024-25 will be presented by Finance Minister Ms Nirmala Sitharaman; it's her seventh budget, and many expectations are doing the rounds.

[Read: The Mutual Fund Industry's Expectation from Modi 3.0's Full Budget]

Different segments of the population, including salaried individuals, senior citizens, and women, have specific expectations, especially concerning tax provisions. Additionally, there is a widespread call for increased investment in sectors like agriculture, healthcare, education, and infrastructure to drive overall economic growth.

The Modi 3.0 government endeavours to balance these diverse expectations while ensuring fiscal prudence. The upcoming budget is expected to reflect a blend of populist measures and strategic economic reforms designed to stimulate growth and development.

As India awaits detailed budget announcements, the focus will be on how the government plans to navigate the current economic challenges and deliver its vision of a prosperous and inclusive future for all citizens.

In this article, we will delve into the expectations of the society and what the Modi 3.0 government is planning to deliver.

1. Salaried Individuals

The salaried class has always kept high expectations from the budget, but the last few budgets have been quite disappointing in terms of opportunities to optimise tax and potential for long-term savings with higher returns.

One of the most significant areas of interest for salaried individuals is the potential changes in income tax slabs and rates. The middle class has been advocating for higher income tax exemption limits and reduced tax rates to increase disposable income.

Current Scenario:

• The basic exemption limit is up to Rs 2.5 lakh as per the old tax regime and up to Rs 3 lakh for Individuals HUFs opting for the new regime

• For senior citizens (60-80 years), it is Rs 3 lakh, and for super senior citizens (80+ years), it is Rs 5 lakh

• The tax rates range from 5% to 30%, based on income slabs

Expected Changes:

• Increase in Basic Exemption Limit: It is anticipated that the basic exemption limit may be increased to Rs 3 lakh for individuals below 60 years, providing immediate relief to the lower-income group. It is anticipated that the government may raise the income tax exemption limit to Rs 5 lakh under the new tax regime.

• Revised Tax Slabs: There are speculations that the government might revise the tax slabs to reduce the tax burden on the middle class. For instance, the 5% tax rate could apply to incomes up to Rs 7.5 lakh, 10% up to Rs 12.5 lakh, 20% up to Rs 20 lakh, and 30% for incomes above Rs 20 lakh.

• Standard Deduction: An increase in the standard deduction from Rs 50,000 to Rs 75,000 or Rs 1 lakh is also expected, which would benefit salaried individuals by reducing their taxable income.

• Increase in Section 80C limit: Section 80C of the Income Tax Act allows deductions up to Rs 1.5 lakh for various investments and expenditures. It includes investments in PPF, EPF, NSC, life insurance premiums, and tuition fees, among others.

  There is a strong demand for increasing the Section 80C limit to Rs 2 lakh or Rs 2.5 lakh, considering inflation and the rising cost of living. This would encourage savings and investments among salaried individuals. The government might introduce new tax-saving investment options under Section 80C to diversify and boost long-term savings.

• Improve the Housing and Rent Allowance exemptions: Under Section 24(b), a deduction of up to Rs 2 lakh is allowed on home loan interest for self-occupied properties. HRA exemptions are provided based on the actual HRA received, 50% (metro cities)/40% (non-metro cities) of salary, or rent paid minus 10% of salary, whichever is lower.

  Given the high property prices, there is an expectation from salaried individuals to increase the home loan interest deduction limit from Rs 2 lakh to Rs 3 lakh. Revisions in the HRA exemption limits, especially in metropolitan cities where the cost of living is significantly higher, are anticipated to benefit salaried individuals.

[Read: Why Modi 3.0's Full Budget Needs to Harmonize Capital Gains Tax]

2. Senior Citizens

Senior citizens, a significant and respected demographic in India, have specific financial needs and expectations from the upcoming Modi 3.0 budget. As they navigate retirement and the challenges that come with ageing, their primary concerns revolve around income security, healthcare, and tax relief.

Notably, a sizeable segment of India's tax-paying population consists of senior citizens, relying predominantly on pension and interest income. The government has the opportunity to address these issues and provide senior citizens with the support they need for a comfortable retirement.

Senior citizens are hoping for enhanced tax benefits from the upcoming budget to support their financial stability during retirement.

Current Scenario:

• The basic exemption limit for senior citizens (60-80 years) is Rs 3 lakh, and for super senior citizens (80+ years), it is Rs 5 lakh.

• Additional deductions are available under Section 80TTB for interest income up to Rs 50,000.

Expected Changes:

• Higher Exemption Limits: An increase in the basic exemption limit to Rs 3.5 lakh or Rs 4 lakh for senior citizens and Rs 6 lakh for super senior citizens would provide significant relief. This adjustment would help them manage their finances better, especially those relying on pension and interest income.

• Enhanced Section 80TTB Benefits: The deduction limit under Section 80TTB might be raised to Rs 75,000 or Rs 1 lakh; it would acknowledge the rising interest rates and help senior citizens earn better returns on their savings without a hefty tax burden.

• Healthcare Deductions: Healthcare costs are a substantial concern for senior citizens, given the increased medical needs that come with ageing. Under Section 80D, senior citizens can claim a deduction of up to Rs 50,000 for health insurance premiums. An additional deduction of Rs 50,000 is available for medical expenses for very senior citizens who are not covered by health insurance.

[Read: What Senior Citizens Expect from Nirmala Sitharaman in Budget 2024]

Given the rising cost of health insurance premiums, an increase in the deduction limit under Section 80D to Rs 75,000 or even Rs 1 lakh is expected. This change would make it more affordable for senior citizens to maintain comprehensive health insurance coverage.

Enhancing the deduction limit for medical expenses from Rs 50,000 to Rs 75,000 or more would provide better financial security. This is especially critical for those who face significant out-of-pocket medical expenses not covered by insurance.

3. Women

As the Modi 3.0 government gears up to present the full budget on July 23, women across India have specific expectations and aspirations. Addressing these will be crucial for the administration to foster gender equality and empower women economically and socially.

Empowering women through financial incentives has been a focus area for the government. Here are the key areas where women expect significant attention and reform:

Women are looking forward to tax provisions that will provide financial relief and encourage economic participation.

• Special Tax Deductions: Currently, no specific additional tax benefits are available for women. The introduction of additional standard deductions or exclusive tax benefits for women taxpayers or increased limits under Section 80C can significantly enhance their disposable income. Such measures can encourage more women to join the workforce and contribute to household income.

• Maternity and Childcare Expenses: Enhanced tax deductions for maternity-related expenses, childcare, and education fees are highly anticipated. Increasing the limits on these deductions would alleviate the financial burden on working mothers and support their career progression.

• Entrepreneurial Support: Women-led startups and businesses expect incentives such as tax holidays or reduced tax rates for the initial years of operation. These measures can stimulate entrepreneurial activity and help women establish and grow their businesses.

• Investment Incentives: Introducing tax benefits for investments in women-owned enterprises and startups can attract more funding and support the growth of women entrepreneurs. Enhanced deductions for venture capital funds and angel investors focusing on women-led businesses could be instrumental.

4. General Taxpayer's Expectations

The Modi government has consistently emphasised the importance of digital transactions in creating a cashless economy. This push towards digitisation is expected to continue and even intensify in the upcoming budget, with several initiatives likely to be introduced to encourage digital payments and reduce reliance on cash.

• Incentives for Digital Payments: The budget may introduce new incentives for individuals and businesses to use digital payment methods. This could include tax rebates or cashback offers for transactions made through digital platforms such as UPI, credit/debit cards, and mobile wallets.

• Digital Literacy Programs: Expanding digital literacy initiatives to educate citizens, especially in rural and semi-urban areas, on the benefits and usage of digital payment systems. This could involve partnerships with tech companies and financial institutions.

• Enhanced Data Analytics and AI: Utilising advanced data analytics and artificial intelligence (AI) to identify tax evasion and improve compliance. This could involve cross-referencing data from various sources, such as banks, investment platforms, and real estate transactions, to detect discrepancies and ensure accurate reporting.

• Strengthening Digital Security: Implementing robust cybersecurity measures to protect digital transactions and taxpayer data from fraud and breaches. This could involve collaborations with cybersecurity firms and investments in secure digital infrastructure.

Additionally, there are sector-specific expectations from the Modi 3.0 budget. Each sector, whether agriculture, healthcare, education, infrastructure, or technology, plays a vital role in driving growth, creating employment, and ensuring the well-being of the population.

The agriculture sector, for instance, is crucial for food security and rural livelihoods, while healthcare ensures a healthy workforce and population. Education is fundamental for developing human capital, infrastructure is necessary for enabling business and trade, and technology drives innovation and productivity.

[Read: Is It Wise to Invest in Sector & Thematic Funds And Small Cap Funds Now? Know Here]

Moreover, the diverse needs and priorities of these sectors require tailored financial allocations and prudent policy measures to address specific issues effectively. Sector-specific expectations include increased funding and tax benefits. For example, the agricultural sector may need subsidies and support for modern farming practices, healthcare may require increased funding for infrastructure and research, and education might need investment in digital learning tools and teacher training.

To Summarise...

In essence, the Modi 3.0 budget aims to balance populist measures with strategic economic reforms, ensuring fiscal prudence while stimulating growth. As India awaits the detailed announcements, the focus will be on how the government addresses these diverse expectations, steering the nation towards a prosperous and inclusive future.

With the right mix of policies, the budget has the potential to boost economic recovery, enhance the quality of life for citizens, and pave the way for sustained long-term growth.

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
 

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