Income Tax expectations for Budget 2020: Financial Express Online Survey asked a total of 13 leading economists and experts on whether common man can expect any significant relief on the personal income tax front in Budget 2020.
Budget 2020 Income Tax expectations: Taxpayers should not expect any significant relief on the personal income tax front from Modi government in India Budget 2020, feel most of the economists and experts who participated in a pre-Budget 2020 Financial Express Online Survey. If you are expecting Finance Minister Nirmala Sitharaman to announce some significant personal tax benefits in Budget 2020 speech on Saturday (February 1), be prepared for a surprise, even a shock. It is possible that Finance Minister Nirmala Sitharaman may not provide any significant relief on the personal income tax front due to little fiscal space, our survey shows.
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However, ahead of Union Budget 2020, expectations regarding possible changes in Income Tax slabs and rates are quite high. There were predictions that the Modi government may lower Income Tax rates in order to put more money into the hands of taxpayers to boost demand. India Budget 2020 is being considered as a challenging budget for the Modi government, given the current economic situation of India.
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Financial Express Online Survey asked a total of 13 leading economists and experts on whether common man can expect any significant relief on the personal income tax front in Budget 2020. Four of them stated that FM Sitharaman will announce good news for taxpayers in the Union Budget 2020 India. As many as eight responded negatively, citing fiscal restraints for FM Sitharaman and Modi government in Budget 2020.
Anita Gandhi, Whole Time Director, Arihant Capital Markets Ltd said, “Any significant change in Income Tax front in Budget 2020 will help in demand generation and it will help in bringing more people in the tax bracket.”
Bidisha Ganguly, Principal Economist, CII said, “If revenue considerations allow, the government could reduce the personal income tax rates to enhance disposable income. This would encourage consumption spending by the middle class.”
Expect no populist tax relief
A few experts said there will be some relief on the Income Tax front in Budget 2020 but not as populist as people are expecting. Sachchidanand Shukla, Chief Economist, Mahindra Group sees marginal tax relief being provided. “I expect rationalisation on the personal tax front, some relief and simplification of the tax structure. It will be similar to the move on the corporate tax front, where multiple exemptions may be taken away and the tax rate may be lowered,” he told Financial Express Online.
DK Srivastava, Chief Policy Advisor, EY is of the view that some relief on personal income tax front is possible but it won’t be as big as the one on the corporate tax front. “The tax slabs, in my opinion, should be revised in the medium-term; there has to be a movement towards reducing the tax rates and simplifying the tax structure,” he said.
A leading financial lender stated that there could be some rationalization in income tax slabs during India Budget 2020 to spur consumption. Another large private sector bank stated, “We expect some changes on the personal income tax during Budget 2020 front but not a significant relief. Moreover, income tax changes are likely to benefit consumption at the margin given the low tax base in India.”
Indranil Pan, Group Economist, IDFC FIRST Bank, said: “The government could go in for some targeted measures such as reducing the tax outgo at the lower income tax slabs level.”
Sitharaman can’t relax tax rates?
A few experts said that FM Sitharaman cannot provide significant Income Tax relief in Budget 2020. “There is little elbow room to give any major benefit. One must remember that any major tax benefit will go with a cutback on exemptions which will not be taken on because it will affect some sectors like real estate (housing) and savings (Section 80C). Therefore no major giveaway here,” said Madan Sabnavis, Chief Economist, CARE Ratings Ltd.
Ranen Banerjee, Leader Economic Advisory Services, PwC India, stated, “The headroom available to the government given the need for pump-priming of the economy and sluggish economic growth is very limited in India Budget 2020. Except for some tinkering at the lowest slab level, we do not expect much changes. There could be changes to the capital gains tax though as it is not garnering significant revenues for the government and the revenue impact of such changes will not be significant but will boost the morale of the investors and possibly lead to some sentiment improvement.”
Vikas Vasal, National Leader -Tax, Grant Thornton India stated, “Not much headroom is available for the government in Budget 2020 to announce any significant income tax changes.”