FEBRUARY 27, 2010

Middle Class Budget

By T R Vandana, Certified Financial Planner

THE middle class and the salaried class of this Country have been clamouring for a better slab in income for a very long time. It was a pleasant surprise to many as everyone expected that the excise duty stimulus will be withdrawn. Hon’ ble Finance Minister has left enough disposable income in the hands of the middle class household. For example, in a family where a husband and wife earning about Rs. 8 lakhs per annum may stand to gain at least Rs.1 lakh extra income by way of savings in income tax.

What does this savings in the middle class household will turn into? It means they will that much extra money available for consumption or for investments or for their retirement planning? They may buy white goods such as washing machine, fridge, air-conditioners and cars or may go for a fresh housing loan or an annuity which will revive the industrial and housing sector out of slump and put the Indian economy in a growth trajectory of 9-10%.

A hike in petrol or diesel rates @ Re.1 per litre and across the board hike of 2% excise duties will of course fuel the inflation since the ‘food inflation’ is hovering around 20% in the past few months. While the middle class is upbeat over the unexpected booty by way of income tax relief, the poor will not take further price rise on food. Though Petrol and Diesel prices are due for a hike, it has come at a wrong time. The Government could have mopped up extra revenue through disinvestments of Public sector units.

But the middle class and salaried class could not have asked for more? Hon’ble finance minister will be long remembered for handing out one of the best Income tax slabs for the Country, which is a tribute to the young and hardworking population of India. They may respond to this gesture of Finance Minister through better tax compliance and will put India into an enviable growth trajectory.