1 budget down in 2024. And we’ve still got 1 more to go.

What???

Yup, if you heard Finance Minister Nirmala Sitharaman present the budget yesterday, you’d have noticed it was quite a short one — just 58 minutes. That’s because she presented only an interim budget or a vote-on-account budget.

Let us explain.

2024 is the year of the general election. And this voting process to elect the central government could begin in May. But, our new financial year starts in April. That means the incumbent government still has to manage its expenses and revenues till the votes are counted and a result is declared. Because they can’t get too confident and assume they’ll win another term no?

So, the main objective of an interim budget is to simply present a stopgap solution till D-Day. But once the new government is in place or the incumbents stay on, they’ll present a full-fledged budget. That’ll probably be sometime in July.

Now the question — what did this interim budget have in store for us?

Anything on Personal taxes?

Nope. Absolutely nothing.

Because elections are around the corner, it might have been tempting to indulge in some big move to appeal to voters — such as slashing taxes. But it had none of that. Taxes were left untouched.

Hopefully, July’s budget will bring a better deal for the taxpayers.

But there was something about withdrawing old direct tax notices?

Yup, the Finance Minister proposed to withdraw disputed income tax demands dating back as far as 1962. You know, the kind of disputes where the tax department might say the person has claimed incorrect tax deductions or they've under-reported income.

And here's the thing. In 2020 the World Bank placed us at 115 out of 190 countries on the ‘paying taxes’ metric. Maybe that low rank was partly due to our dispute resolution mechanisms?

Because as of 2017, nearly ?4.96 lakh crores have been locked up in income tax claims. And 66% of them related to disputes below ?10 lakhs. Cases get dragged on in courts for an average of 6 years and eventually, the Indian income tax administration loses almost 9 out of 10 disputes.

So, it not only wastes precious court time, but also increases litigation costs.

That's probably why this Budget suggested waiving off small tax demands of ?25,000 or less with certain conditions up until FY15. And the government claims it could help a whopping 1 crore taxpayers!

Pretty sure it'll reduce the burden on the government and courts too.

Now let's look at the big picture — the Macroeconomic one.

One way to gauge our economy's health is by looking at something called the fiscal deficit.

The government earns revenue primarily through taxes — stuff such as income tax, corporate tax, and GST. It then uses this money to spend on infrastructure and other welfare schemes. But more often than not, there’s a mismatch between the earnings and expenses. Expenses trump income and the gap is called the fiscal deficit. To fund the shortfall, countries borrow money.

So, looking at the fiscal deficit number is crucial. Because if the deficit is large, it means the country isn’t able to manage its income and expenses effectively.

Anyway, when the government announced the budget last year, they said they expected the fiscal deficit to be 5.9% of GDP in FY24. But yesterday, they said that they had performed better than expected. They revised the fiscal deficit for the year to 5.8%.

And the government is even more confident that the deficit will drop to 5.1% of GDP in FY25 (April 2024 to March 2025).

So, how did the government manage to do this you ask?

For starters, they actually received more taxes than expected from people like you and me. Their initial estimate was for ?9 lakh crores. And they now think they’ll get over ?10 lakh crores.