Tax concessions will accelerate both spending and savings: Economists

Kolkata:  Union Finance Minister Nirmala Sitharaman’s proposal to raise the minimum tax slab to Rs 12 lakh from Rs 7 lakh in the new regime in addition to Rs 75,000 of the standard deduction for salaried taxpayers will boost both expenditure and savings among the middle-class section of the Indian population, feel economists.

Former chief economic advisor to the Union government, Ashok Kumar Lahiri, told IANS, that the proposal will have more surplus money in the hands of the middle-class taxpayers which will prompt them to spend more which again will boost market demand and benefit the overall economy of the country.

“At the same time, it will be wrong to think that the money will only boost expenditure and discourage savings. Rather, this proposal will also give scope for the middle-class taxpayers to save more besides spending more. To sum up, the proposal will accelerate spending and savings simultaneously,” said Lahiri, currently a BJP legislator in the West Bengal Assembly.

Economist Probir Kumar Mukhopadhyay feels that the new tax proposal has rightly focussed on demand generation after focussing on the supply side so far. “The focus on the supply side can never be effective unless there is an equal focus on the demand side. It is true that what percentage of the excess money in hand will be spent and how much will be saved will depend on the choice of the individual taxpayers. But generally, the tendency of the middle-class taxpayers is reflected in maintaining a balanced expenditure to savings ratio,” Mukhopadhyay said.

Economists also feel that equally welcome proposals were the rationalisation of tax deductions at source (TDS) for senior citizens which was doubled from Rs 50,000 to Rs 1,00,000. According to them, since the senior citizens are heavily dependent on income from interest, the decision will surely bring cheer for them. “In a sense, this budget after a long time is truly middle-class friendly,” said Mukhopadhyay.

–IANS