5 Things To Expect From Modi 2.0 Govt’s First Budget For Middle Class

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modi 2.0 first budget

As the Finance Minister of India, Nirmala Sitharaman gears up to present her first budget of the Modi 2.0 government on July 5, economists are expecting 5 major income tax sops, especially for the middle class.

The earlier Modi government had introduced a few changes in the income tax in Interim Budget offering relief to taxpayers. More such announcements are expected on Friday.   

A general opinion among the analysts is that the budget will be directed at promoting growth to trigger off India’s economy that has continued to slow down sharply in 2019.

What might be considered as a hint in terms of what to expect from the upcoming budget, the Director of tax and regulatory at Ashok Maheshwary & Associates, Sandeep Sehgal said, “Many benefits for individual taxpayers were already introduced in the interim budget. Not much can be expected on that front in the coming budget exercise.” 

Here are some of the expected changes:

1. Raising Tax Exemption Limit 

Analysts believe that the finance minister may raise the tax exemption limit for individuals from Rs. 2.5 lakhs to 3 lakh of their annual income. The CEO and founder of Clear Tax, Archit Gupta also feels that the exemption limit will be increased to Rs. 3 lakh which will ensure that the taxpayers benefit by at least Rs. 2500 more in the end. 

2. Increase In Income Tax Relief On NPS Exit

The Modi government raised the limit for tax exemption for withdrawing lumpsum from NPS to 60% last year in December. With this introduction, now the entire withdrawal will get an exemption from income tax. At present, 40% of the 60% accumulated corpus withdrawn at the time of retirement by the NPS subscribers is exempted from tax whereas the rest of 20% is taxable. Also, 40% of the total accumulated corpus used for purchasing annuity already comes under tax exemption.  

In the case, Nirmala Sitharaman budget introduces this change NPS will get EEE or exempt, exempt and exempt status. It will make PPF (Public Provident  Fund), and EPF (Employee Provident Fund) investment at the stage from investment, accumulation to withdrawal free of tax.  

3. Raising Tax Exemption Limit Under Section 80C

Analysts believe that the Nirmala Sitharaman-led Finance Ministry will also think of raising tax exemption limit for investments and savings that are made under Section 80 of Income Tax Law. At present, the limit is Rs.1.5 lakh.

The Director at Deloitte Haskins and Sells LLP, Nitin Bajaj thinks that the policymakers should consider raising the deduction under Section 80D from the existing Rs.25,000 to Rs.35,000 so that medical treatment becomes accessible and affordable to patients of all the class. He believes that the rise in inflation levels and medical expenses makes it a necessity.    

4. Re-Introducing Tax-free Bonds To Raise Capital 

Another possible change can be the re-introduction of tax-free bonds for raising capital to support the government’s infrastructure projects. The interest earned through these bonds are tax-free and generally, they have a long maturity duration typically around 10 years or even more. The first major beneficiary could be The National Highway Authority of India (NHAI) now that the current government is focusing majorly on road projects. 

5. Increase In LTCG Threshold Limit 

The government may consider hiking the threshold limit of LTCG (long-term capital gain) on units of equity-oriented mutual funds and sale of listed equity shares. Currently, these are pegged at Rs.1 lakh/financial year.   

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