Union Budget 2024: Eco Survey says tax policies can address income inequality; what's in store today?

BUDGET 2024: The Economic Survey 2024, which was tabled on Monday, noted that tax policies will have a major role to play in tackling income inequality in the coming years as the deployment of technology, like AI, can have a more deleterious impact on employment and income.

The 2022 State of Inequality in India report observed that in India, the top 1 per cent accounts for 6-7 per cent of the total incomes earned, while the top 10 per cent accounts for one-third of total incomes earned. The Government places significant focus on this issue and all the critical policy interventions being undertaken with a focus on creating jobs, integrating the informal sector with the formal sector, and expanding the female labour force are aimed at effectively addressing inequality.

"Tax policies on the treatment of capital and labour incomes will likely play a more important role in the coming years, especially since the deployment of technology like AI may have a more deleterious impact on employment and income," the survey highlighted.

Expectations of tax reforms are high among most sectors, such as retail, real estate, Fintech, education, healthcare, edtech, and others. These sectors are seeking tax reforms and increased allocation of resources for their respective industries.

Akshay Sarma, Chief Financial Officer at axio, said: "Ahead of the upcoming budget, it is crucial to tackle challenges in the finance sector. Resolving tax treatment disparities between banks and NBFCs is paramount. Granting TDS exemption under section 194A to NBFCs would ease liquidity strains. Additionally, enabling NBFCs to carry forward accrued losses in cases of amalgamation or demerger, similar to banks under section 72A, will support consolidation efforts in the sector."

“While the last budget heralded the highest ever allocation for education, a skilled workforce remains the cornerstone of India‘s growth story. The upcoming July 23rd budget must build on this momentum. Tax breaks for education loans, not just for higher education, but also for crucial vocational and skill-based programs, could empower millions. Imagine the impact if this budget incentivized educational institutions to improve their infrastructure, especially in technology and AI. This, coupled with stricter regulations to combat fly-by-night training operators who exploit social media, could revolutionize India’s education and skilling landscape,” Gaurav Bhagat, Founder, Gaurav Bhagat Academy.

In the realm of health insurance, individuals and organisations are pushing for financial modifications to develop a healthcare coverage system that is both extensive and enduring. This includes reassessing Goods and Services Tax (GST) percentages on healthcare offerings to guarantee reasonable costs and availability for individuals across all economic strata. Additionally, there is a call for insurance policies that encompass preventative healthcare services, moving beyond only covering reactive medical interventions.

Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance, said: "I believe it's imperative to look beyond immediate concerns and delve into the broader socio-economic landscape. The government can bridge the protection gap and empower a financially secure India by focusing on tax reforms, universal health schemes, social security measures, and robust risk management strategies."

He added: "One of the major concerns that has been brought to light is the disparity in capital gains tax rates between general insurance companies and other sectors under Section 112A. This discrepancy places general insurers at a distinct disadvantage. To ensure a fair and competitive business environment, I propose that general insurance companies be granted similar tax benefits as other corporate entities."