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The forthcoming budget may allocate more funds to the social sector schemes of the government. This may be possible due to the higher tax collection in both, income tax and GST. The higher collection is likely to provide cushion to the government to remain within the fiscal deficit target.

The interim budget, the last of the current government, may be targeted towards the based is likely to be on the issues being faced by poorer sections of the society, especially in rural areas.

According to sources, collections from income and corporate taxes have been showing buoyancy in the current fiscal, and the total direct tax mop-up is likely to exceed budget estimates by about Rs 1 lakh crore.

The government has targeted Rs 18.23 lakh crore collection from direct taxes in this fiscal. Till January 10, the mop-up stood at Rs 14.70 lakh crore, which is 81 per cent of budget estimates.

On the Goods and Services Tax (GST) front, Central GST revenues are expected to exceed budget estimates of Rs 8.1 lakh crore by about Rs 10,000 crore. GST collections have been buoyant in the last few months with monthly collections topping Rs 1.6 lakh crore. According to estimates, there will be a shortfall of around Rs 49,000 crore in excise and customs duties collections in this fiscal year.

The Centre’s gross tax revenues is expected to exceed the Budget estimates of Rs 33.6 lakh crore by Rs 60,000 crore.
ICRA in its interim budget expectations report had said that it expects gross tax revenues to grow 11 per cent in the next fiscal (2024-25), led by direct taxes and GST collections, even as the growth in excise and customs duty collections is likely to be subdued.

“With ICRA’s nominal GDP growth forecast of 9.5 per cent, tax buoyancy is assumed at a healthy 1.2 in FY2025 (against 1.4 expected for FY2024), in line with the historical average seen during FY2015-19,” ICRA said.

This tax buoyancy has given the government headroom to allocate more funds for social sector schemes, like MGNREGA, rural roads, PM Kisan Samman Nidhi, PM Vishwakarma Yojana without deviating from the fiscal consolidation path of lowering fiscal deficit to 4.5 per cent by 2025-26.

In the current fiscal, the fiscal deficit is estimated at 5.9 per cent of GDP.
The government’s size of the Budget for the current year was Rs 40 lakh crore and next year it is likely to increase by 10 per cent to Rs 43-44 lakh crore.