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Blog: Jaitley's Budget Most Disappointing For Middle Class In Years

Published: March 02, 2015 16:42 IST
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(Varun Sinha is Markets Editor, ndtvprofit.com)

In the build up to his first full-year Budget, Finance Minister Arun Jaitley had said that he is not in favour of burdening the salaried and middle class with more taxes, raising hopes of tax breaks in Budget.

On Saturday, Mr Jaitley did not raise taxes, but he did not offer tax breaks either. Some benefits he announced for the salaried class included increasing transport allowance from Rs 800 to Rs 1,600 per month, raising tax-free threshold for medical insurance from Rs 15,000 to Rs 25,000 per annum and making investment in pension funds tax-free up to Rs 50,000 per year.

These sops will benefit those in the highest tax bracket the most. To benefit from Mr Jaitley's announcements, individuals need to invest Rs 60,000 more (medical insurance plus pension fund), which doesn't sound appealing at a time when salary hikes and increments have been less than exciting.

In a note, Nomura said, "It was one of the very few Budgets that have not given incremental relief in taxation to individual tax payers."

Future Group's Kishore Biyani tweeted, "Wish the Budget was more people and consumer centric that would have led to the consumption led growth."

 

The increase in service tax from 12.36 per cent to 14 per cent appears to have added salt to injury, as costs of nearly all utility bills would rise. Eating out in restaurants, gym and club memberships as well as travelling will cost more from the next financial year.

In another tweet, Mr Biyani said, "Service tax increase in the Budget will hurt people the most on a daily basis".

 

Not to ignore tweets like this.


The middle class feels particularly short changed because Mr Jaitley seems to have favoured corporates over those earning a salary in his Budget.

Both individual and corporate tax rate in India is 33.99 per cent (for highest bracket), which is higher than global average, according to KPMG. But Mr Jaitley's decision to cut corporate tax rate from 30 per cent to 25 per cent (over four years) and leave income tax rates unchanged gives the impression that finance minister has overlooked the common man.

Retail banker Rajiv Anand tweeted, "Corporates will pay 25 per cent but the effective highest individual tax rate is now over 34 per cent."

 

Analysts have pointed that the effective tax rate for corporates is just 23 per cent currently because of many exemptions, which will now be phased out.

"The proposal to lower the corporate tax rate by 5 per cent over the next four years should be interpreted with caution as there is also a move to rationalize the exemptions that are presently provided," said CARE Rating.

The Budget's fine print will indeed bail the finance minister out, but at a time when perceptions matter (remember the controversy about PM Modi's suit), Mr Jaitley has clearly lost some ground to the opposition.

(Disclaimer: The opinions expressed within this article are the personal opinions of the author. NDTV is not responsible for the accuracy, completeness, suitability, or validity of any information on this article. All information is provided on an as-is basis. The information, facts or opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.)

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