No income tax till Rs 12 lakh under New Tax Regime to drive demand for smartphones, laptops

Smartphone

On February 1, Finance Minister Nirmala Sitharaman relieved individual income taxpayers by increasing the income tax rebate limit from Rs 7 lakh to Rs 12 lakh. Experts said this move will stimulate demand for smartphones, laptops, and tablets, leaving India’s youth with more significant disposable income.

“There will be much more disposable income, driving consumption. This will help the electronics industry, especially smartphones, laptops and tablets among youth,” Pankaj Mohindroo, chairman of India Cellular & Electronics Association (ICEA), told Moneycontrol.

Faisal Kawoosa, an analyst at TechArc, said typically, people spend 20% of their monthly salary to buy a new smartphone if they don’t go for any financing.

"So the sweet spot for anyone with a 1 Lakh salary is 20k. With an additional 80k expected to be saved annually due to tax restructuring, they will spend at least Rs 50,000 on the wish list items. Smartphones have been, for many years now, on top of the wish list of any user. Even if they allocate 20k out of this money to buy a better smartphone than they could afford, they will now be looking at smartphones priced around 40k," Kawoosa added.

Techarc expects a Rs 40-60,000 price band to benefit the most from the proposed tax structure. "Of course, lower segments will benefit, but the concentration should be in this price band," Kawoosa added.

Tarun Pathak, research director of Counterpoint, said the middle class got a major relief, and spending will increase. “Overall, great news for the industry, including consumer electronics.”

The minister also announced indirect tax measures to support domestic manufacturing and value-addition and said that 28 additional goods for mobile phone battery manufacturing would be added to the list of exempted capital goods.

Mohindroo said that the move will help deepen the mobile manufacturing ecosystem and increase overall value addition. "It is a step in the right direction."