NEW DELHI: The long-term gain Prime Minister Narendra Modi has promised after demonetisation pain is likely to benefit the middle class. Government sources said a “cheer-all” Budget is likely to be presented on February 1, with the finance ministry set on course with tax sops.
A section of the BJP leadership privately admits that demonetisation has hit the core constituency of the party—the urban middle class and small-scale businessmen—hard. They hope a feel-good budget will turn popular perception dramatically in the party’s favour.
Incidentally, it will be presented at a time when the electioneering for Assembly elections in five states—Uttar Pradesh, Uttarakhand, Goa, Punjab and Manipur—are in the last stages. However, since the Budget is a Constitutional obligation, announcing relief measures will not affect the Model Code of Conduct, stated a top BJP strategist.
“The government is aware that demonetisation has dulled demand. It will rise only if the salaried class has additional money in its pockets.
“There is a clear consensus within the government that the time to reward the middle class has arrived and that tax relief has to be substantial,” a source close to BJP chief Amit Shah said. The middle class fretted over income tax slabs that had remained unchanged in the last Budget.
“Income tax exemptions up to Rs 3,50,000 against the current restriction of Rs 2,50,000 could be on the cards. House rent deduction limit may also be increased significantly from the current annual ceiling of Rs 60,000. The government had given an additional exemption of Rs 50,000 on housing loans. This may be hiked to encourage the middle class to buy houses, and boost the construction sector,”the source added.
With the Modi government netting over Rs 35,000 crores in taxes from the Voluntary Disclosure Income Scheme, and public sector banks flush with deposits following demonetisation, sources said that the government will have enough elbow room to pour money into rural areas, too, by substantially hiking allocations for construction of rural roads and highways.