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Tax sops likely in Modi government's first full year Budget on Saturday |
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NEW DELHI: Finance Minister Arun Jaitley will present tomorrow the first full year Budget of the NDA government, which is termed as a 'make or break' fiscal exercise widely expected to unveil pro-common man measures and push forward 'Make In India' campaign.
The Budget, to be presented in the backdrop of the ruling BJP-led NDA losing Delhi elections, is likely to either raise tax slabs or hike investment limit in saving instruments.
The Finance Minister is also likely to pursue the path of fiscal consolidation and keep the fiscal deficit target at 3.6 per cent of GDP, down from 4.1 per cent expected this year.
Besides doling out sops to the individual tax payers, he is also expected to unveil initiatives to boost investments by corporates and promote manufacturing as part of the 'Make In India' campaign that aims to make the country a global manufacturing hub and create jobs.
The Economic Survey released today on the eve of the Budget said that it should aim at creating a competitive, predictable, clean and exemption-light tax policy regime that will lower the cost of capital, incentivise savings and facilitate tax payer compliance.
It has also underlined the need for 'Big Bang' reforms to boost growth to 8-10 per cent in the coming years. Besides , it has pitched for raising public investments to drive economic growth and improving business environment by making regulation and taxes less onerous.
Jaitley, who in his maiden Budget in July 2014 had outlined his approach to providing relief to individual tax payers, is expected to continue this in the BJP government's first full year Budget tomorrow.
Last year, he had raised the personal income tax exemption limit by Rs 50,000 to Rs 2.50 lakh and also raised by same amount the exemption from payment of I-T on savings to Rs 1.50 lakh.
However, this time around Jaitley, according to experts, may choose only one of them as he looks at additional revenue to boost public spending and push economy to high growth path.
He may also look to raise the tax exempted investment limit in health insurance as well as exempt savings in pension schemes at all three stages -- entry, accrual and withdrawal.
Another option before the Finance Minister is to expand the scope of Leave Travel Allowance (LTA) and allow people to claim tax benefit every year.
The BJP government fared badly in the recently concluded Delhi Assembly elections, wining only three out of 70 seats.
With the government focusing on core sector, Jaitley may come out with tax saving infrastructure bonds and greater tax relief for payment of interest and principal on housing loans.
The Finance Minister, who did not make any changes in the rate of surcharge on corporates or individuals last year, may retain them at the existing level. A surcharge of 10 per cent is levied on individuals on income of over Rs 1 crore and for corporates with a profit of over Rs 10 crore.
On the corporate side, Jaitley is expected to postpone implementation of the controversial General Anti Avoidance Rules ( GAAR) by at least two years as it might adversely impact the investment climate which the government is seeking to improve.
Pressure is also building on Jaitley to announce tax concessions for the Special Economic Zones (SEZ) to bring back investors who have been surrendering permissions obtained by them to set up SEZs.
On the indirect tax side, the Finance Minister will lay the ground for implementing the Goods and Services Tax (GST), which is expected to come into force from April 2016.
Towards this, he may gradually raise the J O¥eOym^ tax rate from the current 12 per cent as the GST would have only one rate of indirect tax.
As regards the inverted duty structure the Budget may address the concerns of the industry, especially in sectors such as auto, electronics and pharma.
Inverted duty structure refers to taxation of inputs at higher rates than finished products. It results in build-up of credits and cascading costs.
Industry has been demanding that government remove the anomalies with regard to taxation of raw material and other inputs.
Source : economictimes.indiatimes.com
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