The salaried and individuals have high expectations from India Union Budget 2018 as far as income-tax slab rates are concerned. There is much anticipation that income-tax slab rates for year 2018-19 to be announced in the budget to presented on the date of February 1 will up the exemption by at least Rs 50,000.
The salaried and individuals have high expectations from India Union Budget 2018 as far as income-tax slab rates are concerned. There is much anticipation that income-tax slab rates for year 2018-19 to be announced in the budget to presented on the date of February 1 will up the exemption by at least Rs 50,000 to Rs 3 lakh from Rs 2.5 lakh currently. In a survey conducted by www.financialexpress.com, 13 participants felt that income tax slabs will be revised in the upcoming budget, while 6 said there would be no revision. This survey was conducted among 21 experts, economists & fund managers.
Even though most of the respondents felt that the slab rates would be revised upwards, one message was clear – an upward revision in slab rates may not be very substantial or may target a section of taxpayers. Some even felt that a relief under Sec 80C would be more likely than a revision in income-tax slabs.
Budget 2018: Income tax slab hike expectation
But, first, the case for a hike in the exemption limit. “A minor revision for income tax slabs looks possible given that income tax collections have been growing over 20% for the last two years, said Sahil Kapoor, Chief Market Strategist, Edelweiss Investment Research in his response to the survey. Others feel that an increase in income tax slabs in India Union Budget 2018 would be good not just for the common man & the middle class, but, would also leave more room for disposable income thereby helping the economy. “Rationalisation of income tax slabs could be an effective way to provide relief to middle class and boost consumption to support the recovery in the economy in FY 2019”, said Jaideep Arora, CEO, Sharekhan.
Inflation is another factor working in the favour of a hike in exemption limit of income tax slabs. “Yes, there is a case as some inflation adjustment should be allowed, said a global firm not willing to be quoted. Another respondent – a large financial firm – who wanted to remain unquoted said “Cost of living has increased. People also need to have more money in their hands which will boost consumption and help in economic growth. Last year’s revision of tax rate in the lowest slab to 5% from 10% is also fuelling expectations of a rejig. With that change, the difference between the lowest and the next slab rate has increased quite a lot. The next slab rate straightaway starts at 20%. “There could be quite a rejig. 5% introduction is a distortion. Streamlining of direct taxes is needed”, says Dhirendra Kumar of Value Research.
Budget 2018: Hike in income tax slabs to be limited?
While these factors do point to the happy scenario of rise in income tax slab rates in India Union Budget 2018, there are many other equally good arguments that suggest a status-quo or a limited relief to only some taxpayers. “With subdued investment performance and outlook coupled with recent deceleration in disposable income there should be some targeted relief to lower middle class through such measures”, said Sujan Hajra, Chief Economist, Anand Rathi Securities in response to FE Online’s pre-India budget 2018 survey. Leading industry body CII’s chief economist Bidisha Ganguly too felt there would be some relief, especially for those in the lower income bracket who are getting hit by inflation.
Watch video: 10 expectations of the common man from Budget 2018
But, there is also a possibility of the middle-class and the salaried being left stranded over their demand of a substantial relief after the tough times faced by the time after demonetisation & GST. Curiously, it is GST that could hold back any revision of tax slabs at this point of time in Budget India 2018. “The government needs to keep revenue flowing and as such likelihood of a slab change remain narrow, especially as GST collections are expected to remain tepid”, said a global firm which participated in the survey. Madan Sabnavis, Chief Economist at Care Ratings believes that any relief on the tax front will happen at the lower level. “The relief will be at a lower level. The exemption limit is likely to be raised by Rs 50,000,” Sabnavis tells FE Online. Brokerage Motilal Oswal’s Siddharth Khemka doesn’t see any hike in exemption limit.
Even if there is no relief in the form of an increase in income tax slabs or exemption limit for the salaried or the middle-class in the Union Budget 2018, not all hope is lost. Sec 80C can be the saviour and not just give tax relief but also step up financial savings for both individuals and the government. “GST collections are slower than anticipated the government is finding it difficult to manage the fiscal deficit. In this background, it makes sense to increase the limit of 80C, which also provides relief to the middle-class taxpayers”, says Rusmik Oza, Head-Mid-caps, at Kotak Securities.
While this survey clearly enunciates the practical constraints in giving away much, a survey on the street will most likely establish a clear expectation of a substantial reward for the honest taxpayer who shoulders most of the tax burden in the country.