Here's what you can expect in the Budget Session that begins on Jan 31

The government has called a meeting of floor leaders of different parties in Parliament on Tuesday (January 30) ahead of the Budget Session.

It is a customary practice ahead of every session as leaders of different parties highlight the issues they want to raise in Parliament, and the government offers them a glimpse into its agenda and seeks their cooperation.

It will be a short session this time, between January 31 and February 9, with Finance Minister Nirmala Sitharaman set to table an interim budget ahead of the Lok Sabha polls. The session will begin with President Droupadi Murmu’s address. The new government will present the full-fledged budget.

No grand policy announcements expected

Most of the analysts opine that the Union government’s vote-on-account will focus more on capital expenditure and less on populist measures, though there are a few who expect the event to make some concessions in view of the impending elections.

The vote-on-account is designed to help the government meet its expenses until a new government is formed in May. Most analysts don’t anticipate any grand policy announcements in light of the fact that the finance minister herself clarified the matter a few days ago.

“The 1st Feb budget is just a vote on account, a budget to meet expenditure till the next government comes to power. No spectacular announcements, you will have to wait till after the general elections,” Union Finance Minister Nirmala Sitharaman said at the CII's Global Economic Policy Forum 2023 in New Delhi on December 7 last year.

Continuing the trend from previous years, the Centre is expected to continue its thrust on capital expenditure in the upcoming year too, albeit at a slower pace than previous years. The Centre had raised the budget estimate for capex to Rs 10 lakh crore for 2023-24 from Rs 7.28 lakh crore in 2022-23 and Rs 5.92 lakh crore in 2021-22.

Experts predict interim relief in tax cuts

However, contrary to Sitharaman’s statement about the budget being only about expenditure, some of the analysts have predicted an interim relief in tax cuts as an attempt towards improving consumption.

Tweaks in certain income tax rates, especially for those at the bottom of the taxpayer pyramid, are expected in the interim budget. A hike in standard deduction along with a higher exemption limit to incentivise taxpayers to shift to the new income tax regime are likely.

A foreign stock market research firm, Jefferies, too has a different take on the vote-on-account, stating that it would set the broad direction for the main budget that will follow towards the middle of the year. It pointed out that the February 2019 interim budget set the agenda for the full-fledged budget that followed in July.

Unlike most others, Jefferies expects a relatively tepid growth in capex at around 7-8% and more focus on welfare schemes. However, the broker believes the slower capex growth by the government will be offset by the private and housing sectors.

PM Kisan scheme payout may increase

Meanwhile, there are reports that the Modi government is contemplating to make some changes to their welfare schemes like the Pradhan Mantri Kisan Samman Nidhi. As per media reports, the government might increase the PM Kisan scheme payout by 50 per cent this year, from Rs 6,000 to Rs 9,000 per year. The outlay of the PM Kisan scheme was Rs 60,000 crore in the last year’s budget. This is expected to see a 50 per cent increase this year.

Economists believe that the government is likely to make three major social sector announcements in the Union Budget 2024 and the increase of the payout in the PM Kisan scheme for farmers is one of them. They also feel that the Centre’s housing scheme – PM Awas Yojana – will be one of the prime focuses of the government during the budget presentation. Apart from welfare schemes, the Centre is expected to continue the push for capital expenditure, as private sector investment is yet to pick up across sectors, the report added.

Similarly, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) is likely to witness an enhanced budgetary allocation after seeing a 49 per cent reduction (from revised estimate of FY23) in the initial budget estimate of Rs 60,000 crore for FY24. The government had said it was a demand-driven scheme, and more funds would be allocated as and when needed. This has been subsequently reflected with an extra allocation of funds of Rs 16,143 crore for the MGNREGS in the first supplementary demands for grants presented in Parliament in December 2023.

Tax cut on NPS withdrawals likely

The Centre may slash tax on contributions and withdrawals in the National Pension System (NPS) to make it more attractive for taxpayers, especially those aged above 75 years.

The Pension Fund Regulatory and Development Authority (PFRDA) has sought more tax exemption on employer contributions to pensions in order to align it with Employees' Provident Fund Office (EPFO). Hence, some announcements on this front is likely in the interim budget.

For contributions under NPS, only up to 10 per cent of basic salary and dearness allowances by a corporate are exempt from tax currently while it is 12 per cent under EPFO.

In its budget expectations, Deloitte India said the NPS annuity portion should be made tax-free for the holders from the age of 75 so that tax burden can be reduced and long-term savings can be promoted. Currently, the lump-sum withdrawal of 60 per cent is tax free under the pension system. Calls are also growing loud to bring in tax breaks for NPS contributions under the new tax regime.