 What is the single biggest headline out of budget 2023? It's that finance minister Nirmala Sita Raman has given a huge tax break to the middle class. Those who earn less than 7 lakh rupees a year, which is a little less than 60,000 rupees per month, will not have to pay any tax from the next fiscal year. Till now, the threshold at which you had to pay income tax was 5 lakh rupees per year and news anchors and pundits have called this a big relief to the middle class. But as you know, there is a catch. The tax rebate is only for those who move to the new tax regime under which you have to give up all other tax benefits that the old system allows, such as concessions on house rent, home loans, insurance premium and on tax free investments that you might make. It is good to remember that four years ago, Piyush Goyal as in Terrain Finance Minister had said that if a taxpayer took advantage of all the tax benefits available to them, then they wouldn't have to pay any tax up to an annual income of 9 and a half lakh rupees. That was the old regime, which still continues. That effectively means that those who pay house rent or have a home loan or have health insurance, for them, nothing has changed. They gain nothing. In reality, there is only one category for whom there has been a real drop in tax rates and that is those who earn more than 5 crore rupees a year. Yes, not even the super rich, but the ultra super, super rich. They were paying an effective peak tax rate of 42.74%. Now they will pay 39% at the peak rate. At an income of 5 crore rupees, they will pay nearly 1.6 lakh rupees less every month. Those are the only clear winners from the tax cuts offered by the FM. Yes, there will be some amongst the middle class who might benefit as well. Those who already own their homes and they don't save much. The Finance Minister has said that these income tax giveaways will mean that the government will have to forego 37,000 crore rupees as income tax revenues, which it would have otherwise got without these tax cuts. Now the budget estimates tell us that the government expects to get about 9 lakh crore rupees in income tax collection in the next fiscal year, which is 10.5% more than what it got in 2022-23. If you add the 37,000 crore that the government is giving up, then income tax revenues would have been about 9.4 lakh crore, which would have been 15% more than the present year's collections. Now it is reasonable for us to assume that if income tax rates remain the same, the tax collections would rise at the same rate as income of those paying taxes. So it would be fair to assume that if income tax collections would have gone up by 15% without the new rebates, then the government is also assuming that the total income of taxpayers will also rise by 15%. Now how many people pay income tax in India? About 5% file at IT returns and some of these are zero tax returns. So the number of income taxpayers is less than 5% of the population. So the government's own calculation suggests that this top 5% of India's population will see a 15% increase in their income in 2023-24. But please know that the budget assumes that GDP will go up by just 10.5%. Please note that this is a nominal GDP growth, which is the change in GDP at prices of those years without adjusting for inflation. You have to remove inflation from this to get the real GDP growth rate, which is what we generally talk about when we talk about GDP. So coming back to our point, the overall income growth of the entire country is going to be 10.5%. But the top 5% will see a 15% rise in their income. What does that mean for inequality in this country? According to the World Inequality Database, the top 5% of Indians earn about 45% of the total national income. Now let's, for simplicity, assume that in 2022, the total national income of India was 10,000 rupees. That means the top 5% earned 4,500 rupees out of that, 45%, and the remaining 95% earned 5,500. If the GDP grows by 10.5% as the government assumes, then it will rise to 11,050 rupees. Now the government's own assumption suggests the top 5% income will go up by 15%, which means it will rise from 4,500 rupees to 5,175 rupees. The remaining 95% will get the rest out of the total national income, 11,050 rupees, which works out to 5,875 rupees. And that is an increase of less than 7%. In other words, the richest 5% will see an income growth of 15% well as the remaining 5% will see a growth of just 6.8%. Now remove inflation from that and they will be left with virtually nothing. You could say that the government will protect the poor by giving them subsidies, financed by the taxes they collect. But the Modi government has actually cut subsidies and welfare schemes in this budget. To name just a few, the food subsidy has been reduced from 2.87 lakh crore rupees to 1.97 lakh rupees down 31% compared to last year. The fertilizer subsidy given to farmers has dropped from 2.25 lakh crores to 1.75 lakh crores, that's 22% down. MG Narega, a lifeline for the poor, has been slashed as well from 89,000 crore to 61,000 crore, again down 31%. PM Kisan, where budget estimates last year were 68,000 crores, has been reduced to 60,000 crores down 12%. And this is without taking inflation into a co-hound. And no, the poor will not be protected from GST. The government expects GST collections to grow by 12% next year, faster than the GDP growth rate. And everyone agrees that indirect taxes like GDP are regressive because they tax everyone equally rich or poor. On the other side, corporate taxes are only expected to grow by 10%-5%, which is the same as the GDP growth rate. This makes it a pro-rich, anti-poor budget. Well, all welfare schemes have been defunded and the rich are being rewarded. Of course, it is possible that midway through, new schemes will be launched for the poor. After all, there are many key elections this year and it is the last full budget before 2024. But it is clear that the Modi government wants to send a signal to the rich that it is batting on their behalf because the affluent might not count when it comes out to vote. Sometimes they don't even come out to vote, but they matter a lot when it comes to influencing public discourse and raising funds for fighting elections. Before I go, a reminder to you to subscribe to our channel and press the bell icon to get notified every time a new video drops. 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