Income tax relief should not be seen as govt shifting focus from capex: Nirmala Sitharaman

MUMBAI: Finance Minister Nirmala Sitharaman on Monday clarified that the massive income tax relief given in Budget 2025 doesn’t mean that the government has shifted focus to consumption from capital expenditure.

Keeping people earning up to Rs 12 lakh annually out of the income tax ambit has triggered a debate that the government has shifted focus to boosting consumption after the two consecutive quarter GDP figures showed tepid growth.

At a post-budget interaction with stakeholders in Mumbai, finance minister Sitharaman said there is no reason for people to think that the emphasis has shifted from capital expenditure to consumption, as he spelt out the consistent rise in capital spending provisions over the past few years.

Finance Minister Nirmala Sitharaman, in today’s press conference, highlighted a ₹16 Lakh Crore allocation for capital expenditure while ensuring tax relief for individuals. She acknowledged Prime Minister Narendra Modi’s support in making annual incomes up to ₹12 Lakh tax-free.… pic.twitter.com/ctmD417C0j

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She supplemented that the broad picture is that the government’s emphasis since Covid remains on public expenditure for building capital assets. This time, the capex provisioned in the Budget 2025 is over 10.2 per cent higher at about Rs 16 lakh crore, including the PSUs capex spending. The government itself has Budgeted Rs 11.21 lakh capex for 2025-26.

The effective capital expenditure is projected at 15.48 lakh crore as against 13.18 lakh crore in the revised estimates of 2024-25. Effective capital expenditure includes core capital outlays and the grants in aid to states for creation of capital assets. Though the grants in aid for creation of capital assets is accounted in Budget as revenue expenditure, they go for creating capital assets in the states.

“And therefore, I would think the emphasis, or any reason for people to think that the emphasis has shifted from capital expenditure towards consumption, is not right,” she said.

She added that the government has enhanced the capital expenditure budget and simultaneously given some concessions through a reduction in tax, particularly personal income tax, for people who would want to spend or save or invest.

She thanked the prime minister “for being absolutely considerate” about taxpayers and rewarding the taxpayers from the big tax relief. She said the prime minister readily agreed that the Budget should propose tax relief up to Rs 12 lakh rupees.

“And that is why today probably (it) is giving a picture, that we have shifted emphasis for consumption boosting, rather than for capital asset building, which has been the feature all the way,” she said.

Sitharaman, recently at a press conference, asserted that income tax relief provided for in the Union Budget coupled with RBI repo rate cut put together will boost recovery in consumption in the economy.

In the Union Budget for 2025-26 income tax exemption limit has been extended from Rs 7 lakh to Rs 12 lakh, providing significant relief to taxpayers, especially the middle class.

An estimated one crore middle-income Indian taxpayers will be out of the tax net. As a result of these tax relief proposals, the government will forego revenue of about Rs 1 lakh crore in direct taxes and Rs 2600 crore in indirect taxes.

The government expects that taxpayers saving money through lesser income tax will plough it back in the economy in form of either consumption, savings or investments. (ANI)