The Union Budget 2023, to be presented by the finance minister on 1 February 2023, being the last full budget of the current government before the next general elections, is a critical tool for the government to strike the right chord with the electorate. This includes youth of the nation who are either freshly added taxpayers or potential taxpayers who will join the league over the next 12-18 months, popularly known as millennials.
Young working professionals are struggling with high inflation, uncertainties around jobs due to recessionary trends in the developed markets with concomitant shrinking employment opportunities. Expectations of the millennials are primarily in terms of measures targeted towards their personal growth. Start-up culture has developed entrepreneurial zest amongst many in this generation. Some of them have already embarked on their start-up journey and many more are about to begin.
These millennials need the right economic environment which will encourage world-class educational infrastructure, creation of employment opportunities, incentives to start-ups and a stable tax system. In summary, this young working population expects this budget to address their financial concerns in the post-pandemic era.
Some of their specific asks from the budget are:
1. Relaxation in personal income-tax rate. The alternate tax regime was an effort by the government to provide some respite to the working class. However, not many taxpayers have taken to this alternate regime mainly due to insignificant impact on the tax liability and unavailability of several deductions.
Revising the overall tax slabs may be the only solution which will leave more disposable cash in the hands of individuals. It is even more important for the young generation as they look forward to pursuing their dreams both in terms of personal aspirations as well as accumulating funds to pursue their entrepreneurial endeavours.
2. Rationalisation of tax slabs needs to be bundled with an upward revision of the existing standard deduction of Rs. 50,000/- given to salaried individuals and enhancing the threshold of Rs. 1.5 lakh for making tax deductible investments will equally benefit the working class as well as entrepreneurs. Overall, these measures are likely to encourage the millennials to make investments out of their savings which, in turn, would help them achieve their personal and professional financial goals.
3. Remote/hybrid working is the need of the hour. Hence, it is popular amongst young professionals, especially those who are in start-up mode and do not wish to invest heavily in the infrastructure. Given this, some tax break for those working on the hybrid model is another item on this wish list. Further, changes in SEZ regulations to allow increased work from home may address this concern.
4. Long-term investments are necessary not only for personal financial growth but also for securing the future. Generally, the tendency to save is missing at a young age. To increase awareness and encourage long-term savings culture amongst youngsters, the government may consider some tax incentives.
5. The young demography is technologically savvy today. This leads to exploring complex financial instruments, such as cryptocurrencies as one of the investment avenues. It is inevitable to avoid the same in today's advanced world. Considering this, such new contributors to the economy are looking forward to more clarity in the government's stance on tax and regulatory aspects of cryptocurrency transactions from this budget.
It is also anticipated that the government will push public-private participation in the education sector. New education policy, opening the country to foreign educational institutions, etc. are some measures taken in this direction. Further, extending monetary reliefs to higher educational institutions, enhancing educational infrastructure in India, ease of getting funding for higher education at beneficial rates and increasing the tax benefits of education loans, etc. will enhance access to the world class education facilities in the country.
Additionally, access to easy finance to encourage start-ups and increased capital expenditure in the manufacturing sector is essential if India has to achieve the USD 3T economy mark. It would be interesting to see the government's approach to stimulate positive sentiment amongst the millennials and reassure financial stability in the upcoming budget session after their rollercoaster Covid ride.
Riaz Thingna – Partner, Grant Thornton Bharat