Finance Minister Arun Jaitley will on Wednesday present his fourth and perhaps the most challenging Budget that may look to soften blow of currency ban with tax and other sops as he seeks to revive growth. While largely sticking to fiscal consolidation roadmap, Jaitley will present the Budget for 2017-18 amid strong headwinds caused by government decision to invalidate 86 per cent of the currency and the newly elected US President making protectionist noises.
Topping the list of sweeteners could be the hike in Income Tax exemption limit to Rs 3 lakh from current Rs 2.5 lakh as the Minister will look at putting more money in hands of people to not just create a feel good atmosphere but also check the disruptive impact of demonetisation on demand, supply chains and cratered credit growth.
Alternatively, he may raise the deduction limit for interest paid on home loans to Rs 2.5 lakh from Rs 2 lakh currently. A higher medical rebate may also be on the cards. Besides tax break, there could even be a universal basic income in the Budget, industry officials and tax experts said. But cutting 30 per cent corporate tax rate to lift sagging investments may not be easy given that government’s official estimate of 7.1 per cent GDP growth for the current financial year does not take into account the chaos wrought by demonetisation.
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While revenue collection targets for the current fiscal may exceed, there are doubts if Jaitley may project any substantial jump in tax receipts in 2017-18. Also, the rising oil prices are a cause of worry for him, leaving him with very little fiscal room to manoeuvre social and infrastructure schemes.
Incentives or schemes for farmers and rural India, women and social sectors like health and education may be cornerstone of his budget given that five important states including Punjab and Uttar Pradesh will be voting within days of his Budget presentation.