Defence gets boost but Budget delivers shock to poor, middle class

NT Correspondent 

Union Finance Minister Nirmala Sitharaman on Tuesday presented her fourth budget which will increase investment in defence, railways and infrastructure but stopped short of giving relief to the middle class keeping personal income tax rates unchanged and also delvering a ‘mild shock’ to rural households by cutting the allocation for the crucial MGNREGS job scheme by as high as 25 per cent.

The defence budget was increased to Rs 5.25 lakh crore in a modest hike from last year’s allocation of Rs 4.78 lakh crore with a major push on procurement of military hardware from domestic industry to cut imports. As high as 68 per cent of the capital defence procurement outlay will be set aside for domestic industry and 25 per cent of the allocation for defence research and development (R&D) will be for the private sector, academia and startups, said Ms Sitharaman.

For every rupee entering government coffers, 58 paise will come from direct and indirect taxes, 35 paise from borrowings and other liabilities, 5 paise from non-tax revenue like disinvestment and 2 paise from non-debt capital receipts, according to the Budget documents. Goods and services tax will contribute 16 paise to every rupee while corporate tax will contribute 15 paise. The government is also looking to earn 7 paise for every rupee from Union excise duty and 5 paise from customs duty. Income tax will yield 15 paise to every rupee collected.

A large number of commonly used items, including headphones, earphones, loudspeakers, smart meters, imitation jewellery, solar cells and solar modules will become more expensive due to a hike in customs duties on imported parts, as proposed by the finance minister. However, imported cut and polished diamonds, frozen mussels, frozen squids, asafoetida, cocoa beans, methyl alcohol and acetic acid will become cheaper as a result of rationalisation in customs duties.

Belying expectations, Ms Sitharaman did not tinker with the personal income tax rates which could have been a source of relief for the salaried middle class. The minister also did not raise standard deduction, which was widely anticipated in view of elevated inflation levels and the impact of the pandemic. The standard deduction currently stands at Rs 50,000.

The corporate tax rate too was kept at the same level. The FM announced that RBI will introduce digital rupee in FY23 to boost the digital economy and for better currency management.

The finance minister further said that in 2022-23, states will be allowed a fiscal deficit of up to 4 pc of GSDP (Gross State Domestic Product).

In another major decision to tax cryptocurrencies and other virtual assets, Ms Sitharaman proposed a 30 per cent tax on income from transactions in such assets. Gifts in crypto and digital assets will also be taxed, she said. The Railway Ministry has been allocated Rs 140367.13 crore in the Budget - Rs 20,311 crore more than the revised figures of the previous fiscal.

The rail sector will develop “One Station One Product”, which will leverage local produce carried on the railways, said the minister.

National highways will receive a major boost and will be expanded by 25,000 kilometres during 2022-23. “PM Gati Shakti Master Plan for Expressways will be formulated in 2022-23 to facilitate the faster movement of people and goods,’’ she said.

The government will also bring a battery swapping policy to boost use of electric vehicles.