Interim Budgets and the Untouched Tax Slabs: A Tradition Held

The recent interim budget, presented just months before the crucial Lok Sabha elections, surprised no one by leaving the tax slabs untouched. This adherence to tradition reflects the delicate balance between providing relief and avoiding pre-election populism.

Why No Changes?

Several factors contribute to this trend:

• Election Sensitivity: Introducing major tax changes close to elections can be misconstrued as vote-buying tactics, potentially violating the model code of conduct.
• Fiscal Prudence: With elections looming, governments prioritize fiscal stability, avoiding drastic measures that could impact the financial landscape.
• Limited Scope: Interim budgets, by their nature, are meant to bridge the gap until the regular budget. Introducing sweeping tax reforms falls outside their intended purpose.

Looking Back:

Past interim budgets illustrate this pattern:

• 2019: In the election year that saw Prime Minister Modi secure a second term, the interim budget left tax slabs unchanged but increased the standard deduction for salaried individuals.
• 2014: The interim budget under the UPA government saw minor tweaks to indirect taxes but no significant changes to tax laws.

Expectations and Reality:

While some anticipated an increase in the standard deduction under the new tax regime, the budget focused on targeted relief for specific segments like senior citizens and disputed tax demands.

The Road Ahead:

The full-fledged budget expected after the elections will likely hold the key to any major tax reforms. With a clearer electoral mandate, the government may have more leeway to introduce structural changes to the tax system.

In Conclusion:

The interim budget's decision to maintain the status quo on tax slabs aligns with established practices. While it may not offer immediate relief to all taxpayers, it underscores the cautious approach taken during election periods. The true picture of tax reforms might emerge only in the post-election budget, once the electoral dust settles.