The Ministry of Finance is considering pro-middle class proposals in its latest comprehensive NDA II government budget which will be presented on February 1 at the Lok Sabha.
The ministry is considering proposals sent by various government departments on specific measures that could be announced in the budget, benefiting a large part of the middle class, sources said.
The government did not raise the ₹2.5 lakh income tax exemption cap that was set in 2014 by then Finance Minister Arun Jaitley in his first budget.
Moreover, the standard deduction has remained at ₹50,000 since 2019. Several experts are of the opinion that the exemption limit as well as the standard deduction should be increased to compensate the salaried middle class for the high levels of inflation.
Finance Minister Nirmala Sitharaman’s recent statement that she is aware of pressures from the middle class has raised hopes that some incentives may be offered to them in the upcoming budget.
“I, too, am middle class, so I can relate to middle class pressures. I identify with middle class, so I know,” she said earlier this month.
In the same breath, the Minister pointed out that the current government has not imposed any new tax on the middle class.
She said the government has taken various measures such as developing the subway network in 27 cities and building 100 smart cities to promote living comfort.
The minister gave assurances that the government could do more for the middle class, because its population is growing and it has become important now.
“I fully recognize their problems. The government has done a lot for them and continues to do the same,” she said without making any commitments.
Apart from tinkering with the exemption limit and the standard deduction, the Ministry of Finance is also considering the possibility of increasing the limit under 80C which includes investments in life insurance, FDs, bonds, housing and PPF.
Payment of medical insurance premium is also under consideration, sources said, adding that the government could simplify capital gains tax rules for the benefit of middle-class investors who have started investing in capital markets.
The insurance industry has argued for a separate tax deduction provision for life insurance, tax exemption for annuity income and higher deductions for health insurance premiums.
If there is an increase in the limit below 80C with a particular focus on the insurance segment, it would help push term insurance or other protection schemes, which can provide essential financial protection to the family. in the event of the premature death of the winning member, said Max Life Insurance MD and CEO Prashant Tripathy.