Understanding the Budget 2024: A Deep Dive into Taxation and Public Reaction
On July 23, Finance Minister Nirmala Sitharaman presented the Budget for 2024, which has sparked intense public reaction. Even staunch supporters of Prime Minister Narendra Modi have expressed frustration with the government's policies. The primary concern revolves around the perception that tax collection primarily targets the middle class, while the wealthy seem to benefit disproportionately. In this blog post, we will dissect the key aspects of the new budget and its implications.
Public Outcry Over Taxation
The negative reactions to the budget have been severe. Many, who previously expressed support for Modi, are now vocal about their dissatisfaction. This shift is evident from tweets and social media posts, where people who once supported the government are now pleading for fair treatment and expressing their discontent over the tax policies.
Comedian Abhijeet Ganguly's viral tweet highlights the frustration:
"If I earn money, Nirmala taxes it. If I spend money, Nirmala taxes it. If I don't earn or spend, my money just lies in investments, and Nirmala taxes that too. And if I pay tax, there's an additional cess."
This sentiment reflects a broader concern about the increasing burden of taxation on ordinary citizens.
Capital Gains Tax Changes
One of the most criticized aspects of the new budget is the change in capital gains tax. This tax is levied when you sell assets such as property or investments. The budget has increased both short-term and long-term capital gains taxes:
Short-term Capital Gains Tax (STCG): Previously at 15%, now raised to 20%.
Long-term Capital Gains Tax (LTCG): Previously at 10%, now increased to 12.5%.
While the exemption limit (threshold) for LTCG has been raised from ₹1 lakh to ₹1.25 lakh, critics argue that the overall increase in tax rates makes investing in stocks and mutual funds less attractive.
Impact on Futures and Options Trading
Traders in futures and options are also affected. The Securities Transaction Tax (STT) has been increased:
Futures: From 0.0125% to 0.02% of the transaction value.
Options: From 0.0625% to 0.1% of the option premium.
These changes have been met with criticism from traders, as the increased costs could deter participation in these markets.
Economic Survey Insights
The Economic Survey for 2023-24, presented a day before the budget, provides context for these changes. It warns of excessive claims on the real economy by equity markets, suggesting a potential market bubble. The survey notes that an overheating stock market could lead to instability rather than resilience.
Interestingly, this is a reversal from previous government positions, which used the stock market’s growth as an indicator of economic health. The current stance reflects concerns about market volatility and speculative trading.
Addressing Unemployment and AI Concerns
The Economic Survey also discusses unemployment and the impact of artificial intelligence (AI) on the job market. By 2030, the survey states that 78.5 lakh jobs need to be created annually. It acknowledges that a significant portion of graduates are unemployed due to a lack of relevant skills and highlights AI as a major disruptor in the future of work.
Changes in Non-Financial Assets Taxation
For non-financial assets like real estate, the long-term capital gains tax has been reduced from 20% to 12.5%. However, the removal of indexation benefits—adjustments for inflation—means that the real tax burden could be higher, especially for assets purchased many years ago. This could affect property investors differently depending on their specific situations.
Angel Tax and Other Adjustments
The budget proposes the removal of the "angel tax" on startup investments, a move welcomed by many, including opposition parties. Additionally, minor adjustments have been made to income tax slabs, providing limited benefits to the middle class.
Conclusion
The Budget 2024 has introduced several changes that impact various sectors differently. While there are benefits such as the removal of angel tax and adjustments to income tax slabs, the increased burden on capital gains, futures, and options trading has caused considerable dissatisfaction. The government's focus on addressing economic imbalances, unemployment, and market stability reflects a shift in policy priorities, but it remains to be seen how these changes will affect ordinary citizens and the economy in the long term.
As always, individual reactions to these changes will vary based on personal financial situations and investment strategies.
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