Budget 2018 for taxpayers: Finance Minister Arun Jaitley's Union Budget 2018 speech on February 1 left most salaried individuals, the common man and in general - taxpayers - disappointed! Expectations were high that Jaitley would have a bonanza in store for taxpayers. But all's not lost!
Budget 2018 for taxpayers: Finance Minister Arun Jaitley’s Union Budget 2018 speech on February 1 left most salaried individuals, the common man and in general – taxpayers – disappointed! Given two back-to-back reforms (demonetisation and then GST) plus the fact that this was the last full Budget of the Narendra Modi government ahead of Lok Sabha polls 2019, expectations were high that Jaitley would have a bonanza in store for taxpayers. From revision in tax slabs, tax rates to hike in Section 80C exemption limit – personal finance experts had multiple recommendations for Modi government’s Budget 2018. But, except for the re-introduction of standard deduction to the extent of Rs 40,000, no other major tax relief was announced. That too was offset greatly by the fact that medical reimbursement and travel allowances (Rs 15,000 + Rs 19,200) to the extent of Rs 34200 were done away with.
But even as middle-class and common man moans the lack of tax respite, experts support the government’s move to not be populist on this front. In a post-Budget 2018 Survey conducted by FinancialExpress.com, a majority of the respondents believe that the government had little bandwidth to give a big tax relief. As many as 12 out of 18 economists, researchers and experts surveyed by Financial Express Digital said that the government had limited fiscal scope and hence more tax relief could not have been provided in Budget 2018. Siddharth Khemka, Head- Retail Research, Motilal Oswal is of the view that “once the overall tax compliance increases, the government could look at giving some relief but not before that”.
Gaurav Dua, Head of Research at Sharekhan acknowledges the need for some relief but adds that the fiscal scope was limited. A leading Economy expert with a global consultancy says that there has been relaxation in the tax slabs for the common man in the lower tax brackets in the past. “The fiscal headroom was very clearly limited and that too in a pre-election year where the expenditure is expected to be high. A modest effort has been made through bringing back the standard deduction though it subsumes the medical and travel allowance related exemptions,” he tells FE Online while responding to the survey.
But all’s not lost! Sachchidanand Shukla, Chief Economist at Mahindra Group believes that the time was not right for a substantial tax relief. Taxpayers may get some good news later this year or in the next Budget, he opines. “The fiscal scope was limited in this Budget and till the GST collections stabilise, the government didn’t have the option of rewarding honest taxpayers substantially. Also, the Direct Tax Committee report is expected in the first half of this year. Any major change on the income tax front makes sense only after considering the recommendations of the committee,” he tells FE Online while participating in the survey. “Nothing stops the government from announcing changes to DTC in this year or even the Budget,” he adds.
The Direct Tax Code Task Force is slated to give its recommendations to the government in the middle of this year. Any major change on the direct tax front ahead of this committee’s report made little sense. However, it remains to be seen what the recommendations are – will the tax filing becoming easier? Will standard deduction be hiked further? Experts certainly feel that some tax revamp is likely ahead of Lok Sabha polls 2019!