Stating that Budget 2017 will focus on wealth redistribution, CLSA’s Senior Economist Rajeev Malik on Tuesday told CNBC TV18 that the government may look at increasing exemption limit for personal Income tax. “The Budget may offer a change in individual tax slabs and give sops for rural India,” he said. While the near-term impact of the currency recall exercise was expected to be negative, December earnings for corporates will reflect the real impact, said Malik, adding that the impact of demonetisation is likely to span over two quarters. Besides, CLSA has also cut its GDP growth forecast for FY17 by 1.2 percentage points to 6.5 percent, he said, adding that the current disruption is unlikely to affect the outlook for FY18.
According to an India Today report, the Narendra Modi government is considering a proposal to revise the base Income Tax slab and increase it up to Rs 4 lakh per annum from the current Rs 2.5 lakh per year. The channel reported that the government may announce revised tax slabs before the announcement of Uttar Pradesh assembly election dates. Quoting sources, India Today also said while people in the Rs 4-10 lakh income group may be taxed at 10%, 15% tax is likely for the 10-15 lakh income group. Similarly, while people in the Rs 15-20 lakh income group may have to pay 20% tax, 30% tax may be imposed on those having income above Rs 20 lakh.
If implemented, the new tax proposals will give a huge relief to taxpayers reeling under the impact of high inflation and high tax rates. However, government spokesperson Frank Noronha rejected the report about new income tax slabs. ANI reported him calling it “baseless and unfounded”. Earlier on December 14, Union Finance minister Arun Jaitley had indicated that the government may reward the common man by lowering both direct and indirect tax rates in Budget FY18 as demonetisation is set to expand the tax net. While the central bank is remonetising by constantly releasing new banknotes, which would be “significant” in the next three weeks, Jaitley said the strategy is to make future transactions substantially digital to reduce dependence on cash. “Once they (black money hoarders) are substantially digital, they will get caught in the tax net,” he said.