'For many taxpayers the Budget may act as a soothing balm'

...for others it would be an incentive to participate more robustly in equities and other tax instruments.

Illustration: Uttam Ghosh/Rediff.com

The first post-GST Budget will be announced on February 1st, 2018.

In the months post GST implementation, the government has achieved many milestones - the Bankruptcy Code and the Aadhaar Bill for instance.

However, there has not been much headway regarding land acquisition or labour laws, which are necessary impetus for infrastructure and job growth.

The forthcoming Budget is all set to change this.

There is also a growing suspicion that due to the drop in fiscal growth immediately after GST was launched, and the months of confusion and heartache that followed, the government might try a slight appeasement policy with the Budget.

Speculations are rife about how this Budget will affect us and our pockets, so let’s dive right into it.

Increased focus on rural schemes

Annual farm growth dropped as low as 1.7 per cent in the quarter ending September 20‘17, even as economic growth picked up to 6.3 per cent from September’s 5.7 per cent mark.

Due to this, it is highly expected that the new Budget will have a strong focus on rural development schemes.

We may soon see increased funding for farm and rural sectors, and for the creation of infrastructure and jobs in rural regions.

The Budget can also allow for higher procurement prices for farm produce along with other tax reforms directed at the farm owners.

Direct taxes

The FM had promised, way back in 2015’s Budget, that the burden of tax on the corporate sector will be lowered.

Last year, the corporate tax on companies with an annual turnover up to Rs 50 crore was lowered.

It now stands at 25 per cent as compared to the earlier 30 per cent.

The onus now lies on the government to expand this benefit to others in the corporate world, as well.

As regards the ‘aam aadmi’, the changes foreshadowed have to do with personal investments and the deductions levied on them.

We hope that the 2018 budget will give more opportunities to individuals to save on taxes by investing in tax-saving instruments.

The limit for Section 80C should be raised to Rs 200,000 (it is currently capped at Rs 150,000).

The additional amount may be kept for claiming principal repaid towards a home loan.

Taxpayers also hope that the government will take measures to make NPS investments attractive by doing away with the 20 per cent tax on withdrawal corpus.

Medical reimbursements may also be relooked at for a a revamp, with the reimbursement limit hiked to at least Rs 30,000.

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Higher tax benefits on philanthropic gestures for private individuals, and continuing with the LTCG exemptions on equities will also make for a tax-friendly budget.

Indirect taxes

The business community has been looking forward to a further reduction in tax rates under GST, and if the same is being planned by the authorities then we may hear about in the Budget announcement.

Although most of the indirect tax decisions are now taken via the GST Council.

Talk about a possible merging of the 12 per cent and 18 per cent tax brackets has been in the air for a while, and the budget may be used as an opportunity to clarify the fate of covering petroleum products under GST.

Conclusion

The first Budget after the economic upheavals of 2017 have plenty of hopes pinned to it.

For many taxpayers the Budget may act as a soothing balm, and for others it would be an incentive to participate more robustly in equities and other tax instruments.

What it eventually turns out to be is a question only time will answer.

Archit Gupta is founder & CEO of ClearTax

Union Budget 2018: Complete Coverage