Taxpayers have much expectation from the Union Budget 2018. However, will Finance Minister Arun Jaitley extend any major tax relief to them?
Looking towards the Union Budget 2018 and Finance Minister Arun Jaitley with much hope? Particularly in the wake of the DeMo impact on the job market, rising inflation as well as the 2019 polls? If that is the case, then better tone down your expectations as the FM is unlikely to give any major tax sop to the middle class people this time.
Tax experts say that although there are a lot of expectations from the Union Budget 2018, the government faces a tough task at hand to meet the demands of different stake holders and also to contain its fiscal deficit. Therefore, major tax concessions seem unlikely in this budget.
“Post demonetization and introduction of GST, the economic activity and GDP growth are facing some short-term challenges. Further, rising oil prices also pose a threat in balancing the budget spend. Therefore, we may see a more pragmatic and balanced approach on the tax front. Though some tax relief to reduce the overall tax burden for the common man is a reasonable expectation, we may not see any major tax concession per se. The tax relief may be in the form of reduction in the effective tax rate, especially in lower tax slab rates, or increase in the investment-based deductions under Section 80C of the Income-Tax Act, 1961,” says Vikas Vasal, National Leader-Tax, Grant Thornton India LLP.
Tax experts are also of the view that with the Modi government continuously striving to widen the overall taxpayer base, it is very unlikely that FM Arun Jaitley will raise the basic exemption limit immediately. The Budget 2017 was quite indicative of this with amendments like:
# Reduction in the 87A rebate amount from Rs 5K to Rs 2.5K and eligibility limits from Rs 5 lakh to Rs 3.5 lakh, and
# Not changing the tax slabs, but reducing the tax rate for only the tax slab of Rs 2.5 lakh to Rs 5 lakh from 10% to 5%.
“Although looking at the Gujarat assembly election results and the upcoming general election in 2019, many are contemplating that the Union Budget 2018 will be a populous budget, in our views however the middle class should not expect much in the form of any tax benefit. Instead of providing direct tax cuts, the government will rather focus more on people-friendly schemes (like Housing for All),” says Chetan Chandak, Head of Tax Research, H&R Block India.
However, when the government is striving to reduce corporate tax, it is general expectation from most of the taxpayers that it will also consider providing some tax relief to individual taxpayers in the form of some reduction in tax rates. “We also hope that the FM will positively look at reducing the tax rates to permissible levels so that there is lesser motivation to avoid taxes, which in turn help in enhanced tax compliance and higher revenue collection,” adds Chandak.