Indian Tax Policies and Economic Survey

Jul 28, 2024

Tax Policies and Economic Survey Results in India

Government and Tax Collection

  • Tax Burden on Middle Class:
    Even strong supporters of Modi have started raising their voices against the government.
    • Tax collection mainly from the middle class.
    • Millionaire-billionaire friends get lower taxes.
    • Income inequality worse than British rule.

Criticism of the Budget

  • Political Change:
    • Earlier people thought Modi was a dictator, now there's discontent regarding tax issues.
  • Current Tax Structure:
    • Direct Tax:
      • 30% tax on regular income.
      • 20% (quick earnings) or 12.5% (gradual earnings) on investments.
  • Capital Gains Tax:
    • Short Term (STCG): Less than a year duration.
    • Long Term (LTCG): More than a year duration.
    • Tax increased from 5% to 20%.
    • 1.25 lakh exemption was previously 1 lakh.

Limitations and Technical Changes

  • Securities Transaction Tax Increased:
    • Futures:
      • Increased from 0.0125% to 0.02%.
    • Options:
      • Increased from 0.0625% to 0.1%.

Economic Survey 2023-2024

  • Employment Issue:
    • 7.85 million jobs need to be created annually by 2030.
    • Unemployment rate at 44.49% for age group 20-24.
  • Artificial Intelligence (AI):
    • Increasing uncertainty at all levels.
    • Need to improve skills related to AI.

Tax Reforms and Benefits

  • Reduction in Long Term Capital Gains Tax:
    • From 20% to 12.5%.
  • Removal of Indexation Benefit:
    • Causing losses for older properties.
  • Proposal to Remove Angel Tax Provision:
    • Relief for startups.

Changes in Income Tax

  • Standard Deduction Increased:
    • From 50,000 to 75,000.
  • Minor Changes in Tax Slabs.
    • No changes for the middle class since 2014.

Global and Local Economic Conditions

  • Reduction in Corporate Tax:
    • 19% income tax, 18% GST, 17% corporate tax.
  • Immediate Employment Plans:
    • Financial aid for first-time job seekers.
    • Opportunities for youth with skills and internships.

Conclusion

  • Increasing Income Inequality:
    • The government should not ignore this issue.
    • Ideally, small businesses should be promoted.