The middle class taxpayers may be offered tax benefits in Budget 2018, even as the NDA government looks to woo them ahead of 2019 elections.
The middle class taxpayers may be offered tax benefits in Budget 2018, even as the NDA government looks to woo them ahead of 2019 elections. According to a report in the Times of India, a section in the government wants to ensure the vocal segment is rewarded although the fiscal costs will be weighed.
In his budget speech last year, Finance Minister Arun Jaitley had said, “India has become largely a tax non-compliant society.” The income tax figures substantiate the argument. Only 2.4 per cent Indians paid income tax in the last financial year 2015-2016.
While 3.7 crore individuals filed income tax returns, 99 lakh of those claimed the yearly income below the exemption limit of Rs 2.5 lakh, leaving just 2.81 crore individuals who actually paid tax. Of these 2.81 crore individuals, mere 24 lakh people showed income above Rs 10 lakh, with only 1.72 lakh reporting an income of above Rs 50 lakh. Of the total 2.81 crore taxpayers, 2.47 crore people earned below Rs 10 lakh or belonged to the middle income group.
Among various options being considered are an increase in the tax exemption limit, a return of standard deduction in some form as well as additional benefits for health insurance and even bank fixed deposits, which have become less attractive following the recent surge in stock markets coupled with sops for investment in mutual funds.
The newspaper quoted Sources saying that a section within the government is backing the re-introduction of long term capital gains tax on stock market transactions with riders that it will apply to new transactions above a certain value of, say Rs 5 lakh. Further, the levy can be lower at around 10%. The proposal is in line with the NDA government’s stance of being seen to be pro-poor and middle class with the demonetisation being part of that strategy, along with recent decisions to pare GST on over 200 items that were in the top bracket of 28%.
“It will impact 5,000 investors but will benefit five crore families,” the Times of India reported an unidentified source as saying. In November, during a meeting with the finance ministry, Bombay Stock Exchange (BSE) had suggested the introduction of long term capital gains tax, saying it will end friction in the market and also tackle the problem of manipulation in penny stocks.