The Income Tax Budget 2024 delivered by Union Finance Minister Nirmala Sitharaman marks a pivotal moment for India's economic landscape. Presented against the backdrop of an economy that expanded by 8.2% in the past fiscal year, the budget has significant implications for the middle class, businesses, and overall fiscal policy. This article delves into the key announcements and their potential impacts, offering an in-depth analysis of the new income tax slabs, revenue growth, and fiscal strategies.

Revised Income Tax Slabs: Relief for the Middle Class

In her seventh consecutive budget, Nirmala Sitharaman announced a series of adjustments to income tax slabs aimed at providing much-needed relief to the middle class. The revised slabs are as follows:

₹0- ₹3 lakh: Nil

₹3-7 lakh: 5%

₹7-10 lakh: 10%

₹10-12 lakh: 15%

₹12-15 lakh: 20%

Above ₹15 lakh: 30%

These changes are designed to increase disposable income and stimulate consumer spending, which is crucial given that private consumption has only grown by 4% despite overall economic expansion. The new tax structure aims to reduce the burden on individuals earning between ₹5 lakh and ₹15 lakh, potentially saving taxpayers up to ₹17,500.

Economic Growth and Tax Revenue

The Economic Survey 2023-24 underscores a robust growth in gross tax revenue (GTR) for FY24, estimated at a 13.4% increase. This growth reflects a 15.8% rise in direct taxes and a 10.6% increase in indirect taxes compared to the previous fiscal year. Direct taxes now contribute approximately 55% of the GTR, with indirect taxes accounting for the remaining 45%.

The increased contribution from direct taxes aligns with the government's efforts to enhance the progressivity of the tax system. Improved tax collection efficiency is evident, with the cost of collecting direct taxes dropping from 0.66% of gross collections in FY20 to 0.51% in FY23. This efficiency, combined with heightened compliance, has led to tax revenues exceeding initial budgetary forecasts.

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Fiscal Strategies and Budget Goals

Prime Minister Narendra Modi highlighted the broader goals of the Budget for FY24-25, stating it will lay the foundation for India’s transformation into a developed nation by 2047. The budget will focus on key areas such as youth, farmers, the poor, and women, aiming to address their needs while also maintaining fiscal discipline.

Impacts on Businesses and Investment

The budget also outlines measures to support businesses, particularly Micro, Small, and Medium Enterprises (MSMEs), through reduced corporate tax rates. By simplifying and rationalising the capital gains tax structure, the government aims to reduce complexity and improve compliance, fostering a more conducive environment for investment and business activity.

Conclusion

The Income Tax Budget 2024 represents a significant step towards addressing the financial concerns of the middle class while also ensuring that the government remains focused on long-term economic growth and stability. By revising tax slabs, enhancing tax efficiency, and implementing strategic fiscal measures, the budget aims to balance immediate relief with sustained economic development.

This detailed analysis provides a comprehensive look at the key announcements and their potential impacts, ensuring that readers are well-informed about the latest developments in India's fiscal policy.

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