Shares of consumer focused companies surged post Finance Minister Nirmala Sitharaman announcing massive income tax relief to the middle class in the Union Budget.
Consumer goods companies have been saying for at least couple of quarters now that sales growth had slowed due to sluggish urban demand. High inflation, especially food prices, and lower salary hikes and increments among the salaried class in the last couple of years have been among the reasons why the huge Indian middle class has cut back on spending.
#UnionBudget2025 | Finance Minister Nirmala Sitharaman says, " I am now happy to announce that there will be no income tax up to an income of Rs 12 lakhs." pic.twitter.com/rDUEulG3b9
— ANI (@ANI) February 1, 2025
The government has now done its bit by providing a huge income tax relief for consumers. The key announcement by the finance minister was that there will be no income tax payable up to an income of Rs 12 lakh per annum. This amounts to an average taxable income of Rs 1 lakh per month now exempt, excluding special rate income like capital gains. Add in the standard deduction of Rs 75,000, this limit goes up to Rs 12.75 lakh for salaried tax payers.
The new tax slabs under the new income tax regime are: Nil between Rs 0-4 lakh, 5 per cent between Rs 4-8 lakh, 10 per cent between Rs 8-12 lakh, 15 per cent between Rs 12-16 lakh, 20 per cent between Rs 16-20 lakh, 25 per cent between Rs 20-24 lakh and 30 per cent above Rs 24 lakh.
To recollect, earlier income above Rs 10 lakh in the old tax regime was taxed at 30 per cent. In the new tax regime, income above Rs 15 lakh was taxed at 30 per cent.
The slew of changes to the personal income tax regime intended to give a relief to the middle class, certainly got investors cheered, who lapped up shares of FMCG companies.
Among the heavyweights, shares of Hindustan Unilever surged near 3 per cent and ITC was up 2.5 per cent. Godrej Consumer, Britannia and Emami jumped more than 4 per cent. Varun Beverages, Jyothy Labs, Tata Consumer and Godrej Agrovet were also up 3 per cent or more.
Food companies like Jubilant Foodworks, Sapphire Foods, Zomato and Swiggy also traded sharply higher, as did hospitality companies like Indian Hotels and Lemon Tree.
Consumer durables and discretionary companies too saw a huge up move, with Trent up over 5 per cent, Symphony and Blue Star up near 6 per cent, Crompton Greaves Consumer and Havells rising 4 per cent and Titan up 2 per cent.
Real estate companies also gained momentum post the income tax measures with companies like Prestige, Phoenix Mills, Sobha Realty, Macrotech, DLF and Oberoi Realty gaining from around 0.5 per cent to over 5 per cent.
"Rationalisation of taxes and enhancement of exemption limits can boost disposable income spurring consumption levels and real estate investments, particularly in residential real estate and alternate financial instruments such as REITs (real estate investment trusts)," said Badal Yagnik, CEO Colliers India.
