Union Budget 2018: Is the middle class the biggest loser?
With more cess on health and education, road and infrastructure, very little tax relief and practically no jobs, the pinch will be unbearable.
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The Union Budget 2018 might be hailed as a big rural helping hand, but for the middle classes, the salaried or underemployed, educated, millions, have been left twiddling their thumbs. With virtually no changes in the tax slabs from last year, the added 1 per cent cess in health, education, as well as the unprecedented jobs crisis bogging the middle classes down, normally Modi government's biggest votary, there is bound to be unrest in this thick bracket.
While the Rs 40,000 tax deduction in lieu of travel and medical expenses has been sounded impacting 2.5 crore individuals, and Rs 50,000 deduction on interest against fixed or recurring deposits by senior citizens, these are offset by the freshly increased education and health cess, that's now 4 per cent from the earlier 3 per cent.
#Budget2018 : when we will cease to do away with cesses? Long term capital gains tax is back! Rob the upper class to pay the poor!! The poor vote, the rest must pay their taxes!! While the super rich will remain untouched.. Modinomics as Voter-nomics!!😄— Rajdeep Sardesai (@sardesairajdeep) February 1, 2018
In addition, the LTCG (long term capital gains) tax reintroduced, to be taxed at 10 per cent on amounts over Rs one lakh, mostly in mutual and equity funds and other investments, will be a dampener for those who were looking for some respite. While it's the corporate class that's most exasperated about the LTCG redux, it's actually the middle classes with its meagre investment that will be most affected.
The government has introduced the Long Term Capital Gain Tax on equities, even as the Standard Transaction Tax (STT) remains. Most experts are calling this a double whammy for equity & mutual fund investors. Naturally, the upper middle class section is unhappy #Budget2018— Sameer Hashmi (@sameerhashmi) February 1, 2018
With GST shooting indirect taxes in many sectors, and no change in direct tax structure, the middle classes have been left in a lurch. While the FM says strong infrastructure benefits everyone, the flagship healthcare scheme will be out of bounds for the middle classes, therefore adding to the anxiety.
While for women, the government intends to pay 8 per cent towards EPF for the first three years, encouraging more women to join workforce, the Economic Survey's "lost women" of India have been placed at a staggering 63 million!
The FM said proudly that formalisation has increased tax base and net tax paid per person, which was Rs 76,000 for the average salaried person. In contrast, the business fraternity paid an average tax of only Rs 25,000.
The gap is not only embarrassing, it's alarming and extremely distressing for the middle section, that is clearly out of focus for a government seeking to please either the corporates or the rural poor.
There is no composite programme for big job generation in the interim period, and the anxiety is likely to continue, especially with the global oil prices rising again, and the windfall gains made in between now beginning to taper off. The fiscal target will be breached as a result, and the schemes announced will take their own time to blossom, effectively leaving just hype to play out until the 2019 general elections.
Moreover, to add to the job insecurity, the tear in the social fabric destroys livelihoods, such as in the case of stealing Muslim livelihoods over cow related violence. The employment market will stagnate and the handout to agriculture and MSMEs wouldn't translate into real benefits very soon, leaving the unemployed, educated youths of the lower and middle classes even more restless.