Budget 2023: Finance Ministry contemplating sops for middle class

The Finance Ministry is contemplating various proposals that are likely to benefit a large section of the middle class in the upcoming Budget 2023 to be presented in the Parliament on February 1.

New Delhi:Some good news is in the offing for the middle class in India as the finance ministry is considering proposals to benefit this section in its last full Budget of the Narendra Modi 2.0 government to be presented on February 1 in the Lok Sabha. The finance ministry is looking into proposals sent by various government departments on specific steps which may be announced in the Budget, benefitting a large section of the middle class, PTI reported quoting sources.

The government has not raised the income tax exemption limit from Rs 2.5 lakh which was fixed in 2014 by the then Finance Minister Arun Jaitley in his first Budget. Also, the standard deduction has remained at Rs 50,000 since 2019. Several experts are of the opinion that the exemption limit as well as standard deduction need to be increased to compensate the salaried middle class for an elevated level of inflation.

The recent statement of Finance Minister Nirmala Sitharaman that she was aware of the pressures of the middle class has raised hope that some incentives may come for them in the upcoming Budget. "I too belong to the middle class so I can understand the pressures of the middle class. I identify myself with the middle class so I know," she had said earlier this month.

In the same breath, the minister reminded that the present Modi government has not imposed any fresh taxes on the middle class. She said the government has taken various measures like developing the metro rail network in 27 cities and building 100 smart cities to promote ease of living. The minister gave the assurance that the government can do more for the middle class as its population is growing and it has become sizeable now.

"I quite recognise their problems. The government has done a lot for them and continues doing the same," she said without making any commitment. Besides tinkering with exemption limits and standard deductions, the finance ministry is also looking at the possibility of increasing limit under 80C which includes investment in life insurance, FD, bonds, housing and PPF, among others.

Payment towards medical insurance premiums is also being looked at, sources said, adding, the government may simplify capital gains tax rules to benefit the middle-class investors which have started investing in capital markets. The insurance industry has been pitching for a separate tax deduction provision for life insurance, tax waiver for annuity income, and higher deductions for health insurance premiums.

If there is an increase in the limit under 80C with special focus on the insurance segment, it will help push term insurance or other protection schemes, which can provide essential financial protection to the family in the event of an untimely death of the earning member, said Max Life Insurance MD and CEO Prashant Tripathy.