Budget 2020 is very crucial as government has to tackle falling GDP and growing fiscal deficit. In order to revive the economy the government has to look on taxation issues profoundly. With GDP at lowest in 11 years many sectors in problem. Industry expects a lot from Finance Minister this time. It would be difficult for Union Finance Minister Nirmala Sitharaman to find a balancing act and make everyone happy. Some of the sectors that are going to tougher times include BFSI, real estate and auto; these sectors expect extensive support from government for the revival.
On Corporate Income Tax side, government has already introduced welcomed tax rate cuts but we believe the government must further relax conditions for concessional tax rates for new manufacturing units. We further expect to hear from the government on implementation of Direct Tax Code and introduction of Dispute Settlement Scheme to resolve disputed demands of approximately 8 lakh crores. The government might also bring Infrastructure bonds to raise funds for investment. These changes might help to revive investment, employment and consumption in the economy.
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For Real Estate Sector, it is expected that the FM will take care of the liquidity by further providing easy last mile funding for Builders and Developers. Government is constantly pushing infrastructure development and we hope that the momentum will be maintained in this budget also. On taxation side for developers – decision regarding Input Tax Credit, cost of raw materials, availability of cheaper land, etc, will go a long way in addressing the situation at hand. Apart from this, elimination of taxes on vacant property, dropping circle rates section from Income Tax Act and Taxing of notional rent on unsold inventories will have positive impact on the industry.
On Individual taxation side we expect FM Sitharaman will increase the income tax deduction limit on interest on housing loan and increase in the standard deduction to at least 50 per cent, which will encourage people to go in for their own residential premises and stimulate demand. On Personal income tax we expect tax slab rates should increase from Rs 2.5 lakh to Rs 5 lakh leaving decent money in the hands of individual for consumption and investment. A lot can be improved if domestic consumption increases, which can be attained by reducing GST rates and reduction in personal taxation. The changes in slab rate cuts will come at a heavy cost and we need to see how in these challenging times Finance Minister will be able to maintain equilibrium by providing personal rate cuts and maintaining fiscal deficit.
(Writer is CA Inderpal Singh Pasricha, Senior Partner, I.P. Pasricha & Co. Views expressed are his personal)