top of page

By:

Correspondent

23 August 2024 at 4:29:04 pm

Festive Surge

India’s bazaars have glittered this Diwali with the unmistakable glow of consumer confidence. The country’s festive sales crossed a staggering Rs. 6 lakh crore with goods alone accounting for Rs. 5.4 lakh crore and services contributing Rs. 65,000 crore. More remarkable still, the bulk of this spending flowed through India’s traditional markets rather than e-commerce platforms. After years of economic caution and digital dominance, Indians are once again shopping in person and buying local....

Festive Surge

India’s bazaars have glittered this Diwali with the unmistakable glow of consumer confidence. The country’s festive sales crossed a staggering Rs. 6 lakh crore with goods alone accounting for Rs. 5.4 lakh crore and services contributing Rs. 65,000 crore. More remarkable still, the bulk of this spending flowed through India’s traditional markets rather than e-commerce platforms. After years of economic caution and digital dominance, Indians are once again shopping in person and buying local. This reversal owes much to policy. The recent rationalisation of the Goods and Services Tax (GST) which trimmed rates across categories from garments to home furnishings, has given consumption a timely push. Finance Minister Nirmala Sitharaman’s September rate cuts, combined with income tax relief and easing interest rates, have strengthened household budgets just as inflation softened. The middle class, long squeezed between rising costs and stagnant wages, has found reason to spend again. Retailers report that shoppers filled their bags with everything from lab-grown diamonds and casual wear to consumer durables and décor, blurring the line between necessity and indulgence. The effect has been broad-based. According to Crisil Ratings, 40 organised apparel retailers, who together generate roughly a third of the sector’s revenue, could see growth of 13–14 percent this financial year, aided by a 200-basis-point bump from GST cuts alone. Small traders too have flourished. The Confederation of All India Traders (CAIT) estimates that 85 percent of total festive trade came from non-corporate and traditional markets, a robust comeback for brick-and-mortar retail that had been under siege from online rivals. This surge signals a subtle but significant cultural shift. The “Vocal for Local” and “Swadeshi Diwali” campaigns struck a patriotic chord, with consumers reportedly preferring Indian-made products to imported ones. Demand for Chinese goods fell sharply, while sales of Indian-manufactured products rose by a quarter over last year. For the first time in years, “buying Indian” has become both an act of economic participation and of national pride. The sectoral spread of this boom underlines its breadth. Groceries and fast-moving consumer goods accounted for 12 percent of the total, gold and jewellery 10 percent, and electronics 8 percent. Even traditionally modest categories like home furnishings, décor and confectionery recorded double-digit growth. In the smaller towns that anchor India’s consumption story, traders say stable prices and improved affordability kept registers ringing late into the festive weekend. Yet, much of this buoyancy rests on a fragile equilibrium. Inflation remains contained, and interest rates have been eased, but both could tighten again. Sustaining this spurt will require continued fiscal prudence and regulatory clarity, especially as digital commerce continues to expand its reach. Yet for now, the signs are auspicious. After years of subdued demand and inflationary unease, India’s shoppers appear to have rediscovered their appetite for consumption and their faith in domestic enterprise. The result is not only a record-breaking Diwali, but a reaffirmation of the local marketplace as the heartbeat of India’s economy.

Boon To Working Middle Class

Updated: Feb 3

Working Middle Class

Year after year the union budget continues to be a very popular event in the country, especially for the working middle class, more importantly for the salaried and the MSME business class. The budget speech is generally divided into two parts. The First part mainly covers various budget allocations to different sectors of the economy of the country. The second part generally deals with the provisions of personal and corporate income tax which affects the entire middle class of the country. It also deals with indirect taxes i.e the customs duty and GST. However, in the recent past, it has been noticed that the GST provisions are amended almost throughout the year. Hence the main focus as far as the working middle class is concerned is on the provisions of the personal income tax.


New income tax Bill to be introduced

This year’s budget speech was no exception as the first part dealt with budget allocations to several key sectors like promoting skillful indigenous manufacturing, Education, Health Care, urban development and financial sector. Right at the beginning of the second part, Finance Minister Nirmala Sitharaman announced that a new Income Tax Bill will be introduced in a week’s time. So, the nation can expect a completely new income tax act that can come into force very soon. The objective of the new Income Tax bill is to simplify the Act. The present Income Tax Act, 1961 is considered by many as an ambiguously worded complex text which has led to a lot of litigations on its interpretational aspect in the past. The new bill is expected to be worded in a very simple manner.


Amendments to personal income tax

The Finance Minister proposed some very beneficial income tax provisions right towards the end of her budget speech. For several years now, the middle class which has been the major contributor to the personal income tax collection in the country has been demanding a lower rate of income tax. This demand has mainly triggered from the high inflation rate, the higher cost of living and the reduced spending capacity of the middle class owing to the fact that a substantial portion of their salaries is used up in payment of high taxes. A lower personal income tax rate would result into a sizable disposable income in the hands of the middle class which would result in higher spending which in turn would trigger the economic growth that the PM Narendra Modi has been envisaging for a very long time.


The amount of income up to which no tax shall be payable was Rs 5 lakhs in 2023. This amount was increased to Rs. 7 lakhs in the Finance Act. 2024. This amount has further been increased to a whopping 12 lakhs in the current budget. This has come as a big relief to all the middle-class people who have income up to 12 lakhs. Hence a person having total taxable income upto Rs 12 lakhs will not be required to pay any income tax. In fact, a salaried taxpayer will not be required to pay any tax where his income before standard deduction is less than or equal to Rs.12,75,000. The new tax slabs are also expected to reduce the tax burden of persons having income in excess of Rs.12 lakhs. The basic exemption limit has also been increased from 2.5 lakhs to 4 lakhs. This means that a person having total taxable income up to ₹4,00,000 need not file an income tax return at all. However, it is worth noting that persons having income between 4 lakhs to 12 lakhs must file a return of income and claim a rebate. They will not be required to pay any tax though.


In case of senior citizens, the threshold above which TDS is required to be deducted on interest on fixed deposits has been raised from Rs. 50,000 to Rs. 1,00,000. The provision to claim two house properties as self-occupied properties without any condition is also a welcome amendment. Also, In the previous budget a new provision to file an updated return was introduced wherein a taxpayer could file his or her return of income upon payment of the taxes up to two years from the end of the year. After having received a positive response with over 90 lakhs updated returns being filed in the past year. The period of filing such updated returns has been extended from 2 to 4 years.


Rationalisation of TDS limits

Businesses are also expected to benefit from a reduction in the compliance by rationalization of TDS limits on payment of rent, professional fees, commission etc. Small charitable trusts should also benefit from lesser compliance by the extension of the validity of their registration from 5 years to 10 years. On one hand the working middle class will be happy with the reduction in their tax burden and on the other they will also be hoping that the huge spending will result in employment, good infrastructure and better living conditions.

(The author is a Chartered Accountant based in Mumbai.)

Comments

bottom of page