Budget 2018: Tax Sops likely for middle class as Modi Govt eyes 2019 polls

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Updated: Jan 19, 2018 10:31 PM

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.

arun jaitley, finance minister, finance minister of india, arun jaitleyIn his budget speech last year, Finance Minister Arun Jaitley had said, “India has become largely a tax non-compliant society.” (Image: Reuters)

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.

Do you know What is Finance Bill, Short Term Capital Gains Tax, Fiscal Policy in India, Section 80C of Income Tax Act 1961, Expenditure Budget? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

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