Reason to cheer or cry? What Budget 2024 means for the middle class

Prime Minister Narendra Modi hailed the Budget 2024 presented by Union Finance Minister Nirmala Sitharaman on Tuesday (July 23), saying it will empower the new middle class as well as uplift Dalits, adivasis and backward classes.

“In the last 10 years, 25 crore people have come out of poverty. This budget is for the empowerment of the new middle class. The youth will get unlimited opportunities from this budget,” he said in a video after the budget speech.

“Today’s budget brings new opportunities and a new optimism. This Budget will be a catalyst to make India the world’s third-largest economy,” the PM added.

#WATCH | Post Budget 2024: Prime Minister Narendra Modi says "In the last 10 years, 25 crore people have come out of poverty. This budget is for the empowerment of the new middle class. The youth will get unlimited opportunities from this budget. Education and skill will get a… pic.twitter.com/51rLe7Qoxq

— ANI (@ANI) July 23, 2024

More from Explainers

What happened during Trump's call with Zelenskyy and European leaders? Trump-Putin summit: Why Russia sold Alaska to the US in 1867

Sitharaman presented her seventh consecutive budget and first of the third Modi-led National Democratic Alliance (NDA) government. While presenting the budget, she said it would specifically focus on “employment, skilling, MSMEs, and the middle class”.

Here’s how Budget 2024 impacts the middle class.

Tax respite for the middle class

The Centre has revised income tax slabs in the new tax regime, which the finance minister said will help salaried employees save up to Rs 17,500 annually.

Impact Shorts

View All

'My god, what have we done': The 2 US pilots who dropped atomic bombs on Japan's Hiroshima and Nagasaki

US is making it tougher to obtain green card for married couples. Here’s why

The changes are as follows:

Up to Rs 3 lakh: Nil
Rs 3-7 lakh: 5 per cent
Rs 7-10 lakh: 10 per cent
Rs 10-12 lakh: 15 per cent
Rs 12-15 lakh: 20 per cent
Above Rs 15 lakh: 30 per cent

The tax slabs for the old tax regime remain unchanged.

Sitharaman has increased the standard deduction to salaried individuals and pensioners from Rs 50,000 to Rs 75,000 under the new tax regime, providing relief to the middle class.

This will leave more money in the pockets of the middle class, which can spur consumption.

Standard deduction is a flat deduction from the total salary earned in a year before calculating the applicable income tax rate.

According to Sitharaman’s budget speech, “deduction from family pension of Rs 15,000 is proposed to be increased to Rs 25,000 under the new tax regime.” As Mint noted, this will enhance the financial stability after the retirement of those entitled to a family pension.

The finance minister said these steps will benefit four crore salaried individuals and pensioners.

Speaking to Business Standard, Adhil Shetty, CEO of Bank Bazaar, said, “With the income tax slabs, it’s a case of winning some and losing some. The slight enhancements in the standard deduction, the new tax regime slabs, and the increase in the tax-free Long Term Capital Gains Tax (LTCG) threshold mean you’ll have marginally higher tax-free income… Taxpayers anticipated some inflation adjustment for the old regime slabs, but this appears unlikely.”

PM Awas Yojana Urban 2.0

The finance minister has announced an investment of Rs 10 lakh crore to address the housing needs of one crore urban poor and middle-class families under the PM Awas Yojana Urban 2.0.

“This will include the central assistance of Rs 2.2 lakh crore in the next five years. A provision of interest subsidy to facilitate loans at affordable rates is also envisaged,” the finance minister said.

ALSO READ: Union Budget 2024: From job creation to agriculture, the big takeaways

Big jobs boost

The 2024 Budget focuses on boosting jobs amid the official unemployment rate in urban areas touching 6.7 per cent. The government has allocated Rs 2 lakh crore for job creation over the next five years.

“Government to set up three schemes for employment generation. Scheme for first-timers to provide one-month wage to all persons newly entering the workforce in all sectors. First-time employment scheme to benefit 2.1 crore youths,” the finance minister announced.

She also said the government will launch a scheme to provide internship opportunities in 500 top companies to one crore youth in five years. “An internship allowance of Rs 5,000 per month along with a one-time assistance of Rs 6,000 will be provided,” Sitharaman said.

The government also plans to reimburse Rs 3,000 per month to employers for two years towards their EPFO contributions for each additional employee. This is expected to incentivise recruitment of 50 lakh more people, as per the finance minister.

The Centre aims to increase the participation of women in the workforce by establishing working women hostels and creches. In collaboration with industries, the government wants to conduct women-specific skilling programmes and promote market access for women SHG enterprises.

These measures to boost employment will benefit youth and women entering the workforce.

ALSO READ: Temple corridors in Bihar, focus on Odisha: How Sitharaman’s budget gives a leg up to tourism

Good news for start-ups

Sitharaman has abolished Angel Tax for all classes of investors to strengthen the Indian start-up ecosystem. It is the tax imposed on funds raised by start-ups through the issue of shares to investors. However, it is applicable to funds that exceed the fair market value of the company.

The abolishing of the Angel Tax will promote investment in start-ups.

Pallav Pradyumn Narang, partner at CNK, told Business Standard, “The dreaded Angel Tax was a barrier to investments in India since this involved a huge amount of uncertainty and potential for litigation. This was made worse when the exemption available to foreign investors was withdrawn. The announced removal of this section will certainly foster investments into businesses and reduce compliances and costs of investments.”

With inputs from agencies