Tax Slab Trends In Interim Budgets: Why They Don't Change

The interim Budget this Lok Sabha election year did not make any changes in tax slabs, in keeping with convention. Finance Minister Nirmala Sitharaman only announced relief for old and disputed tax demands up to an extent.

This is in line with expectations, as any major tax relief could be seen as a populist move ahead of the general election due in two months. There is also a risk of violation of the model code.

The BJP is confident of winning a third term in the Centre under the leadership of Prime Minister Narendra Modi.

In the last interim Budget in 2019 - the year PM Modi won a second term - Piyush Goyal, who was then the Finance Minister, had kept the tax slab unchanged, but increased standard deduction for salaried people from Rs 40,000 to Rs 50,000. This time, however, all tax-related matters have been left untouched.

In the last interim Budget, Mr Goyal had also hiked the tax deducted at source (TDS) limit from Rs 10,000 to Rs 40,000 for post office savings and bank deposits.

In 2014, the year the BJP defeated the United Progressive Alliance (UPA) government, the then Finance Minister P Chidambaram in his interim Budget had not made any significant changes in tax laws, but tweaked indirect taxes for a small set of sectors. He reduced excise duty from 12 per cent to 10 per cent on some goods, and gave relief to the automobile sector.

Though there was no expectation of a change in tax slabs in this interim Budget, there was speculation about a possible increase in the standard deduction under the new regime.

The new regime does not allow taxpayers to claim deductions, but eases the tax slabs for a wider range of incomes, while the old regime has a maximum tax slab of 30 per cent from a lower threshold, but also allows claims to be filed for deductions.

With no hike in standard deduction under the new regime, the Finance Minister has not made any significant changes in taxation.