Budget 2018: SBI's expectations from the upcoming Union Budget are based upon the principle of inclusive growth and meeting the medium and long-term objectives set by the government. Here is what SBI expects from FM Arun Jaitley for reducing the common man's tax burden
Budget 2018 is round the corner and with this everyone – from the common man to big corporates – is busy preparing one’s Budget wishlist. Like others, the State Bank of India (SBI) also has its own expectations from the upcoming Union Budget and Finance Minister Arun Jaitley. In fact, “Budget 2018 will be the fifth and final full budget of the present government and SBI expectations regarding this budget are based upon principle of inclusive growth and meeting the medium & long-term objectives set by the government. As per our reading of the things, the budget should give priority to agriculture, MSME, infrastructure and affordable housing,” says Dr. Soumya Kanti Ghosh Group Chief Economic Adviser, SBI.
Agriculture reforms, for instance, should aim at reexamination of legally-created structures whose provisions are restrictive and create barriers to free trade. The Centre in conjunction with States should emulate the price support schemes like in Madhya Pradesh and Haryana, say ‘Bhavantar Krishi Yojana’ for major crops (including vegetables). This scheme will help farmers in situations (when wholesale price of the crop is less than the MSP) and the cost of which is only 10% of farm loan waiver programme as per SBI estimates. Provision of A2 milk in mid-day meals for children will create adequate additional income for 16 million farmer per year.
Regarding investment revival, capital subsidy in case of delayed projects equal to cost overrun may be provided. Cost overrun may be funded at concessional interest rate by the government in such cases.
There is dire need to publish monthly payroll report in India for formal sector as job creation is grossly underreported. Other measures like providing support infrastructure and skilling and certifying workers need to be adopted.
For encouraging savings, there is a need to increase the 80CC deduction to at least Rs 2 lakh. To mobilise deposits, the exemption limit on TDS on interest on term deposits with banks may be raised
and the lock in period for tax savings term deposits need to be reduced to 3 years from the present 5 years and these deposits should be brought under EEE tax regime. “We also expect the government to increase the exemption limit of interest payments under housing loan. The overall impact of such concessions will result in revenue foregone of around Rs 28,500 crore. We, however, believe the Budget 2018 will ultimately be a balance between pragmatism and fiscal consolidation,” says Ghosh.
Watch video: Budget 2018: FM Arun Jaitley May Tweak Income Tax Basic Exemption Limit
According to Ghosh, SBI’s expectations regarding the Union Budget 2018 are based upon the principle of inclusive growth and meeting the medium & long-term objectives set by the government. Since this year is a transition one regarding taxation regime, the Union Budget should accord high importance to priority expenditure areas and give priority to agriculture, MSME, infrastructure and affordable housing.
Here is what SBI expects from FM Arun Jaitley to do to reduce the common man’s tax outgo:
Increase in Tax Exemption Limits
The government has periodically increased the income tax slabs from Rs 22,000 in 1990-91 to Rs 2.5 lakh in 2014-15. Due to the 7th Pay Commission, the personal disposable income has been increased. SBI, therefore, believes there is a need to raise the exemption limit to Rs 3 lakh. Due to such increase in limit, around 75 lakh tax payers will be exempted from income tax.
Increase in 80C Tax Exemption Limits
# The government has allowed Rs 50,000 deductions under Section 80CCD (1) for NPS, which resulted in total deductions to Rs 2 lakh. FM Arun Jaitley should continue to allow Rs 50,000 deduction for NPS.
# SBI also believes there is a need to increase the 80C deduction limit by least Rs 50,000 to Rs 2 lakh. This will cost the government around Rs 8,000 crore.
Increase in Home Loan Interest Deductions
The government should increase the exemption limit of interest payments under housing loan to Rs 2.5 lakh for the existing home loan buyers also from the current level of Rs 2 lakh. There are around 75 lakh home loan buyers in the country. So the increase in home loan interest deduction from Rs 2 lakh to Rs 2.5 lakh will benefit them. This will cost the government around Rs 7,500 crore.
Incentivizing Savings through Bank Deposits
# In an effort to incentivize savings, FM Arun Jaitley can exempt in the Budget 2018 interest of savings bank deposits. The exemption limit on TDS on interest on term deposits with banks may be raised from the present limit of Rs 10000 pa.
# The lock in period for tax-saving term deposits needs to be reduced to 3 years from the present 5 years and these deposits should be brought under the EEE tax regime. This will cost the government only Rs 3,500 crore.
# The overall impact of such concessions will result in revenue foregone of around Rs 28,500 crore, says SBI.