Finance Minister Nirmala Sitharaman on Sunday described the Budget being “by the people, for the people, of the people”, and said Prime Minister Narendra Modi was fully behind the idea to cut taxes for the middle class but it took time to convince the bureaucrats.
“We have heard the voice of the middle class” who had been complaining about their aspirations not being met despite being honest taxpayers, she told PTI in an interview. With the taxpayers also wanting the government to do more to limit the impact of inflation, the Prime Minister was quick to task Sitharaman to look at ways to give relief.
While Modi was quick to agree, it took a bit of convincing to get on board officials in the Finance Ministry and the Central Board of Direct Taxes (CBDT), she said.
Sitharaman on Saturday announced an increase in the personal income tax threshold to ₹12 lakh, up from ₹7 lakh, as well as a rejig in tax brackets that would help those earning higher than that to save up to ₹1.1 lakh.
Tax relief
The ₹5 lakh hike in exemption limit is the biggest ever and equals all the relief that were given between 2005 and 2023. “I think the Prime Minister put it succinctly, when he said it’s the people’s Budget, it is the Budget which the people wanted.” Asked to describe the ethos of the Budget in her own words, she said, “As they say in democracy in Abraham Lincoln’s words, it is Budget by the people, of the people, for the people.”
Sitharaman said the new rates would “substantially reduce the taxes of the middle class and leave more money in their hands, boosting household consumption, savings and investment.”
Explaining the thought that went behind the big announcement, Sitharaman said the tax cuts were in the works for some time. One of the ideas was to make direct tax simpler and easier to comply with. Work on this started in the July 2024 Budget and now a new law is on the anvil, which will simplify the language, reduce the compliance burden and be a bit more user-friendly.
“It wasn’t talking about rate restructuring, although for several years now we have been looking at ways in which the rates can be a lot more taxpayer friendly. And therefore, that work was also going on,” she said. “Equally, after the July budget, there was this voice of the middle class, which felt that they were paying tax... but also felt they don’t seem to have much in the way of redressing their problems.”
The Finance Minister said the Prime Minister meets and listens to the voices of people from different sectors and industry leaders and responds to their needs.
Stating that an attempt had always been to widen the tax net, Sitharaman said the efforts were to get more Indians, who are in a position to pay, to come on board. That attempt of widening the tax net is a continuous, ongoing exercise, she said.
Currently, there are about 8.65 crore income tax return filers. The number swells to over 10 crore after people with TDS liability but not filing returns are included.
Capital spending
Sitharaman defended the modest increase in capital spending at ₹11.21 lakh crore in the next financial year compared to ₹10.18 lakh crore in the current fiscal, saying the quality of spending has also to be seen.
“If we are looking at the numbers — because we’ve got used to 16 per cent, 17 per cent increase (in capital spending) every year from 2020 — and saying you have not increased it by that number in the Budget, I would equally want to ask you to please look at the way in which the quality of spending has happened, particularly capital expenditure,” she said.
She was also appreciative of the States which received the 50-year interest-free share of the money which went from the Central government’s side as capital expenditure.
“They have also shown very great interest in capital expenditure and the quality of expenditure, therefore, has been very good. At the same time, last year we touched ₹11.11 lakh crore and this year building on it, it is about ₹10.1 lakh crore over the revised estimate (RE), which is far more realistic,” she said. The spending in FY25 was lower than the budgeted ₹11.11 lakh crore as four months were due to the General Elections.
“But during that year, the election year, which we’ve just completed, the capital expenditure did go a bit slow. Otherwise, my RE would have also been closer to the budget estimate (BE) number again,” she added.
