Sitharaman's Interim Budget and the taxpayer: A tale of great expectations
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An Interim Budget is traditionally supposed to be just a vote-on-account shorn of any mega announcements or benefits to people. The government is likely to stay on the fiscal course-correction glide path in the Interim Budget for FY25, shunning populist spending or incentives ahead of the summer general election, ET has reported recently, based on information from people aware of deliberations on the subject.
The government is also concerned that any consumption booster could exacerbate inflationary pressures and jeopardise efforts to rein in prices. At the same time, capital expenditure may be raised again in FY25 from the ₹10 lakh crore budgeted in the current fiscal year to spur economic growth, given its high multiplier effect, including the crowding in of private investment. The government expects to meet the FY24 fiscal deficit target with a higher-than-anticipated revenue mop-up, making up for the increase in spending under some heads.
Where does all this leave the taxpayer who expects Finance Minister Nirmala SItharaman to announce income-tax incentives and benefits in the Interim Budget?
The headroom
Direct-tax collections have been on the rise. Personal income and corporate tax collections are likely to rise to more than Rs 19 lakh crore in 10 years of Prime Minister Narendra Modi-led government.
Driven by the increasing income of individuals, net direct tax collections after adjusting for refunds increased from Rs 6.38 lakh crore in FY 2013-14 to Rs 16.61 lakh crore in FY 2022-23. In the current financial year, the collections from net direct taxes — personal income tax and corporate tax — have so far grown by 20 per cent and at this pace, the mop-up is likely
