A Respite for the Middle Class

Before Finance Minister Nirmala Sitharaman presented the Union Budget 2024-25 on 23 July, social media was abuzz with memes that highlighted the aspirations of the middle classes who were looking for respite in the form of either incentives or tax changes. The middle classes can take heart in the sense that the minister has announced several incentives, especially for women and educated jobseekers and those in need of better skills to be job-ready. Among the certain steps that can be seen as pro-middle class is the finance minister’s decision to enhance the standard deduction for salaried employees to ₹75,000 from ₹50,000 under the new income tax regime in FY25. This means a person with a ₹10 lakh income will be taxed only for 9.25 lakhs compared with 9.5 lakh earlier. Besides, thanks to the tweaking of tax slabs, Sitharaman said those opting for the new regime will save as much as ₹17,500 per head.

The Union Budget for 2024-25 has, meanwhile, hiked the long-term capital gains tax (LTCG) to 12.5per cent from 10per cent, while the short-term capital gains tax on some assets will be 20per cent, in a move to discourage short-term trading. Further, the LTCG “not taxable limit” has been raised to 1.25 lakh from ₹1 lakh earlier. Again, the deduction limit for employers’ contribution to the National Pension System (NPS) is now at 14 per cent from 10 per cent earlier.

Since women’s and youth aspirations are at the core of middle-class sentiment, indications from the Budget are that there is some scope for cheer amidst an apparent despair that stemmed from excessive expectations drummed up on social media. Presenting her seventh straight Budget for 2024-25, Sitharaman announced an allocation of more than Rs 3 lakh crore (one lakh crore equals one trillion) for schemes benefitting women and girls, emphasising that the Modi government stands unequivocally committed to promoting women-led development. “For promoting women-led development, the Budget carries an allocation of more than ₹3 lakh crore for schemes benefitting women and girls,” she said, adding that the government will set up working women’s hostels and crèches to promote their participation in the workforce.

Interestingly, much to the delight of the middle classes, which is a vast entity with varying levels of incomes, the Budget has proposed schemes on student loans and urban housing. The government has proposed a central assistance of ₹2.2 lakh crore for urban housing over the next five years as well as an interest subsidy scheme to facilitate loans at affordable rates for urban housing works. Sitharaman also said the government will put in place measures for an efficient and transparent rental housing market with enhanced availability, a music in the ears of those peripatetic job-seekers.

The Budget will provide financial support for loans up to Rs 10 lakh for higher education in domestic institutions and e-vouchers will be given directly to one lakh students every year with an interest subsidy of 3 per cent of the loan amount. It also promised to upgrade 1,000 Industrial Training Institutes (ITIs). “For helping our youth who have not been eligible for any benefit under govt schemes and policies, the government will provide financial support for loans up to Rs 10 lakh for higher education in domestic institutions. E-vouchers for this purpose will be given directly to one lakh students every year with an interest subvention of 3 per cent of the loan amount,” Sitharaman said. In total, the Union Budget for 2024-25 will provide Rs 1.48 lakh crore for education, employment and skilling in the country. Besides, a skill loan scheme will be revised to facilitate loans up to ₹ 7.5 lakh with a guarantee from a government-promoted fund – which is expected to help 25,000 students every year.

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