Budget 2020: Will Union Budget deliver on the expectations of individual taxpayers?

Updated: January 21, 2020 11:50:53 AM

Budget 2020: The Finance Minister has personally indicated on a few occasions that the upcoming Union Budget could provide certain personal tax concessions.

Budget 2020, union budget 2020, Budget 2020 Expectations, Finance Minister Nirmala Sitharaman, income tax, Section 80C, Rationalisation of investment avenues, personal tax sops Union Budget 2020: With personal tax benefits that may accrue in the Budget, one can foresee an increase in disposable income in the hands of the individual taxpayer.

Budget 2020 Expectations: Ever since the corporate tax sops were announced by Finance Minister Nirmala Sitharaman on September 20, 2019, the government has been under immense pressure to provide similar incentives on the personal tax front as well. With the looming economic slowdown, there is a growing demand for a cut in personal tax rates. The Finance Minister has personally indicated on a few occasions that the upcoming Union Budget could provide certain personal tax concessions. However, the economic slowdown impact and related factors would need to be considered by the Finance Minister while presenting any possible personal tax sops and balancing the same with the fiscal deficit target.

With personal tax benefits that may accrue in the Budget, one can foresee an increase in disposable income in the hands of the individual taxpayer. Personal tax rate cut from 30 per cent to, say, 25 per cent and rationalisation of the slabs is one aspect which may lead to more money in the hands of the individual taxpayer which ultimately may lead to an increase in savings and investments, including consumption.

Rationalisation of investment avenues under Section 80C of the Income-tax Act, 1961 and possible introduction of infrastructure bonds could be some areas which may be considered by the Finance Minister to boost savings by the common man, which could lead to further investment in desired areas of growth. A boost to the reality sector in the form of extension of affordable housing benefit up to March 2021, and full deductibility of interest on home loan for a let-out property, could also be considered.

The reduction in base corporate tax rates from 30 per cent to 22 per cent was a welcome move for India Inc. However, the impact of corporate tax cuts, announced in September, on tax collections and fiscal deficit needs to be seen. Thus, a further cut in the personal tax rates in the current economic condition and balancing it with the fiscal deficit target seems quite an onerous task and it remains to be seen how the Finance Minister will pull it through in the upcoming Budget.

(By Divya Baweja, Partner; Mitesh Agrawal, Manager; and Kajal Gupta, Assistant Manager, with Deloitte Haskins and Sells LLP)

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