Tax sops for low income slabs, higher capex likely in Budget

In the past too, interim budgets, also called a vote-on-account, did not entail any major changes. Ahead of the Lok Sabha elections in 2019, then Finance Minister Piyush Goyal had proposed a hike in standard deduction and the threshold for tax deducted at source (TDS), along with sops to farmers and pension cover for unorganised sector workers. Five years earlier in 2014, the Interim Budget by then Finance Minister P Chidambaram had announced a cut in excise duties for small cars, motorcycles, scooters and SUVs besides large and mid-segment cars, and tax relief for mobile handsets.

And in the Interim Budget for 2009-10, towards the end of the first term of the United Progressive Alliance (UPA) government, then Finance Minister Pranab Mukherjee announced easing of fiscal targets. This was preceded by a fiscal stimulus marked by Rs 40,000-crore of tax cuts in December 2008, which was later criticised for posing a challenge to fiscal consolidation.

Before that, in the final year of the AB Vajpayee-led NDA government, marked by the Interim Budget of 2004-05, saw late Jaswant Singh announcing changes in the stamp duty structure, revival packages for the tea and sugar industries, and merging of dearness allowance with basic pay. These weren’t the only measures taken as Singh had already announced major changes in both direct and indirect taxes in January 2004 including a cut in the peak rate of customs duty on non-farm goods to 20 per cent from 25 per cent, lower customs duty on project imports, coal and the power sector, and abolishment of the special additional duty on customs duty of 4 per cent.

While the revenue side of the Budget may see some tax cuts and efforts to increase efficient mobilisation, the focus of public expenditure is likely to be on infrastructure and welfare spending, but which may and can be achieved without huge fiscal implications, a person in the know said.

Continuing the trend from previous years, the Centre is expected to continue its thrust on capital expenditure in the upcoming year too, albeit at a slower pace than previous years. The Centre had raised the budget estimate for capex to Rs 10 lakh crore for 2023-24 from Rs 7.28 lakh crore in 2022-23 and Rs 5.92 lakh crore in 2021-22.

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is likely to see an enhanced budgetary allocation after seeing a 49 per cent reduction (from revised estimate of FY23) in the initial budget estimate of Rs 60,000 crore for FY24. The government had said it was a demand-driven scheme, and more funds would be allocated as and when needed. This has been subsequently reflected with an extra allocation of funds of Rs 16,143 crore for the MGNREGS in the first supplementary demands for grants presented in Parliament in December 2023.

The Budget session of Parliament, the last of the 17th Lok Sabha, will be held between January 31 and February 9. The Interim Budget will be presented by Sitharaman on February 1. The Lok Sabha elections are expected to be held around April-May, following which the elected government is likely to present the full Budget in July.

The government presents a vote-on-account in Parliament to seek approval for meeting expenditure for the first four-five months of the financial year beginning April to pay salaries and meet expenses for ongoing programmes in various sectors with no changes in the taxation structure, until a new government takes over and presents a full Budget that is revised for the full financial year. Over the years, some governments have made policy measures or tweaked tax rates and turned it into an Interim Budget before elections.