Union Finance Minister Nirmala Sitharaman will present the Union Budget 2023-24 on February 1. The government is expected to focus on infrastructure development and announce some relief for people in the form of tax benefits.
All eyes are on how the government plans its expenditure and controls fiscal deficit and inflation. If the government spends more on capital and revenue expenditure than expected then it is likely to increase the fiscal deficit. This could result in higher market borrowing by the government, which exerts pressure on the interest rates and triggers inflation.
Lower fiscal deficit
The Goldman Sachs Group has said that India might cut down its fiscal deficit target by 50 basis points for the next financial year starting 1 April 2023. Goldman economists including Andrew Tilton and Santanu Sengupta wrote in a report that India will keep its deficit to 5.9 per cent of the gross domestic product in the new fiscal year.
The economists observed that the Central government will increase welfare spending while maintaining capital expenditure. "Rural employment and housing are likely to be in focus," the economists said.
The current tax slab has a basic exemption limit of Rs 2.5 lakh for individual taxpayers, which has not been changed since 2014-15. It means that individuals with income below this limit are not required to file income tax returns. Now the income tax exemption limit is expected to be increased to Rs 5 lakh in the upcoming budget.
The taxpayers also expect the government is likely to double the standard deduction from Rs 50,000 to Rs 1 lakh. According to experts, the standard deduction limit should be doubled to account for the growing cost of living and rising inflation.
Infrastructure and social schemes spending
An increased spending on infrastructure is also expected in this year's budget. With this, big infrastructure projects are likely to be launched in the coming years. As this will be the budget ahead of the 2024 general elections, the government is expected to allocate more funds for infrastructure projects and social sector welfare schemes.
Enhanced home loan deduction limit
The taxpayers can avail the deductions on the interest paid on home loan as per the section 24 (b) of Income Tax Act. However, such deduction is capped at Rs 2 lakh per annum. With the rise in price of properties in the past few years, the deduction limit is likely to be increased.