Budget fell short of common man’s broad expectations of tax reliefs

The Union Budget presented by Finance Minister Nirmala Sitharaman on Tuesday in a 1 hour, 30-minute speech that was not just her shortest so far, but also fell short of broad expectations of tax reliefs by the common man as the core focus remained on increasing capital expenditure by 35.4% to Rs 7.50 lakh crore in 2022-23.

The Indian salaried citizenry and the middle class who were hoping for some relief in times of pandemic, with all-round pay cuts and back-breaking inflation, have been left without any significant benefits in Direct Tax measures.

With living expenses having touched the roof, combined with the effects of the pandemic, there was a general expectation that a hike in 80C limit was on the cards. The present Rs 1.5 lakh cap was expected to be revised to Rs 2.5 lakh, but that did not happen.

Though the Budget does not have much to offer on the personal tax front, relief has been provided to persons who have received money for expenses incurred on treatment of COVID-19. Money received by family members on the death of a person will also be exempt up to Rs 10 lakhs for family members now.

What the Finance Minister did say, however, was the promise of 'Updated Returns.' In case taxpayers realize they owe more to the government than mentioned on the Income Tax Return of a particular year, they can now file an ‘Updated Returns’ in two years’ time of the assessment year.

“Presently, if the Income Tax department finds out that some income has been missed out by the assessee, it goes through a lengthy process of adjudication. Instead, with this proposal now, there will be a trust reposed in the taxpayers that will enable the assessee herself to declare the income that she may have missed out earlier while filing her return. Full details of the proposal are given in the Finance Bill. It is an affirmative step in the direction of voluntary tax compliance,” Sitharaman said.

Infrastructure appeared to have emerged as the topmost priority. While the fine print on specific allocation to ministries and programmes need to be studied for the best understanding of the budget, the government upped the outlay for capital expenditure from Rs. 4.54 lakh crore earlier to Rs. 7.50 lakh crore in 2022-23.

While this increase is appearing to be a welcome step, the manner in which it is intended to be spent and through which route is to be seen.

Sitharaman in her speech said that the Budget sought to lay the blueprint to steer the economy over the next 25 years from India at 75 to India at 100. “We are in the midst of the Omicron wave. The speed of our vaccination campaign has helped greatly and I am confident that ‘Sabka Prayaas’ will continue with strong growth,” she said in her opening remarks.

A large part of the Finance Minister’s speech was focused on the ‘PM Gati Shakti’ plan. Sitharaman highlighted seven engines of growth – roads, railways, airports, ports, mass transport, waterways and logistics infrastructure for the plan.

The National Highways Network will be expanded by 25,000 km in FY23. The government has proposed Rs. 20,000-crore which will be mobilized through innovative ways of financing to complement the public resources. Rs. 60,000 crore will be allocated to cover 3.8 crore households in 2022-23 under the Har Ghar, Nal se Jal mission. Under this, 400 new generation Vande Bharat trains will be brought in during the next 3 years.

Sitharaman also further proposed the setting up of 100 PM Gati Shakti Cargo terminals. These will also be developed during the next 3 years and innovative ways of implementation for building metro systems will be explored. "The Budget seeks to lay the foundation and a blueprint to steer the economy over 'Amrit Kaal' of the next 25 years from India at 75 to India at 100," she said.

Sitharaman revealed that railways will develop new products for farmers and MSMEs. She spoke about the concept of 'One Station-One Product' which will help local businesses and supply chains.

While there has been no change in income tax slabs proposed, an increase in both Center and states government employees’ tax deduction limit has been proposed. The Budget proposes to increase this from 10% to 14% to ensure that the social security benefits of state government employees are brought on par with the Central government employees.

The FM has also proposed a reduction in corporate surcharge while the transfer of any virtual digital asset shall now be taxed at the rate of 30%. “Corporate surcharge to be reduced from 12% to 7%. I propose to provide that any income from the transfer of any virtual digital asset shall be taxed at the rate of 30%. No deduction in respect of any expenditure or allowance shall be allowed while computing such income, except the cost of acquisition,” she said in her speech.

Sitharaman said that the Budget proposals for this financial year rest on health and well-being, infrastructure, inclusive development, energy transition and climate action, financing of investments and 'Minimum Government, Maximum Governance'.

“India’s economic growth is estimated at 9.2% to be the highest among all large economies. Under the productivity linked incentive scheme in 14 sectors, 60 lakh new jobs will be created,” she said.

Significant announcements include digital currency, e-passports and a slew of infrastructure projects. While edible oil, wearable electronics, imitation jewelry, imported cut and polished diamonds, frozen mussels, frozen squids, asafoetida, cocoa beans, methyl alcohol and acetic acid are set to be cheaper, as a result of rationalization in customs duties.

On the other hand, imported umbrellas, imitation jewelry, single or multiple loudspeakers, headphones and earphones, smart meters, solar cells, solar modules, X-ray machines and parts of electronic toys will go up.

In the agriculture sector, Finance Minister Sitharaman announced the use of Kisan drones for crop assessment, digitisation of land records, spraying of insecticides and nutrients. “This is expected to drive a wave of technology in the agriculture sector,” she said.

States will also be encouraged to revise the syllabi of agricultural universities to meet the needs of natural, zero-budget, and organic farming, modern-day agriculture. The FM added that funds will be facilitated through NABARD to finance start-ups for agriculture and rural enterprise, relevant for the farm produce value chain. Start-ups will support FPOs and provide tech to farmers.

On the education front, a Digital University has been proposed to be established. It will be made available in different Indian languages, based on a networked hub model. The Finance Minister said that one class, one TV channel will be expanded from 12 to 200 TV Channels to provide supplementary education in all regional languages, with the intention to make up for loss of formal education due to COVID.