Expectations from Budget 2017

The Union Budget for 2017-18 will be presented in Parliament in the first quarter of 2017 on 1st Feb. Expectations from different industries and the public have already started coming in. We at LAKSHMISHREE present you the top expectations from Budget 2017-18:
 

Modification in Income Tax Slabs and Rates:

This is on top of every citizen’s list of expectations. With the demonetisation announcement in November leading to massive inconvenience for the common man, many are expecting the government to increase the tax exemption slab from Rs 2.5 lakhs to Rs 3 lakhs. There may also be a reduction in the tax rates, which currently stands at:

 

·         10 % for incomes above Rs. 2.5 lakhs

·         20 % for incomes above Rs 5 lakh

·         30 % for incomes above Rs 10 lakh

 Also, a higher tax exemption slab and a reduction in tax rates may encourage more people to file taxes. Currently, only around 3% of India’s population file their taxes.
 

Budget 2017-18 Income Tax Slab Rate Expectations
 

Taxable Income	Tax Rate
Less than Rs. 4 lakhs	Nil
Rs. 4 lakhs to less than Rs. 8 lakhs	10% on taxable income exceeding Rs. 4 lakhs (Max. Rs. 40,000)
Rs. 8 lakhs to less than Rs. 12 lakhs	Rs. 40,000 + 20 % on taxable income over Rs. 8 lakhs (Max. Rs. 1.2 lakhs)
Rs. 12 lakhs and above	Rs. 1.2 lakhs + 25% on taxable income over Rs. 12 lakhs

Lower Tax Rates

 

The possibility of change in current direct tax norms such as Income Tax has gained further strength following the late December announcement by the Finance Minister that the focus should be on lower tax rates. The argument is that lower tax rates such as those prevalent in many economies actually have the potential to bring in greater revenues as they have a much broader tax base. India’s traditional mindset that higher tax rates lead to greater tax income needs to be changed according to the statement issued by the Finance Minister, Shri Arun Jaitley. By decreasing the tax rate, goods and services produced in India are expected to be more competitive in the global market enabling Indian companies to generate more revenues overseas.

More Incentives for Digital Payments:

 

The government has already announced incentives for those making payments through digital mediums like debit/credit cards, mobile wallets etc. Service tax on payments for transactions upto Rs. 2000through debit/credit cards have been removed, 0.75% discount has been announced for digital payments at petrol stations. With a vision to move towards a cashless economy, the government may announce further measures to encourage digital payments.

Streamline Existing Tax Saving Vehicles:

 

Usually, new tax-saving schemes are launched every few years but changes required to the existing schemes are often ignored. This means that most of the older options such as fixed deposits, pension plans, insurance policies, etc. are not in sync with the times.

This has an adverse effect on the elderly population, who invested in these schemes many years ago, largely due to lack of better options, and now do not have the resources to take advantage of the new tax saving options. Though the regulatory and fundamental changes required will take time to be implemented, the union budget of 2017 can be starting point to ensure the elderly get the same returns.

For instance, bank fixed deposits can provide returns of 7.5-8% to people over 65 years of age.

More taxes on capital gains from stock investments:
 

There is widespread speculation that the Government, in Budget 2017-18, may introduce new rules for taxing capital gains from stock investments. Currently, there is no tax implication for gains made from stocks that have been held for a year. This minimum holding period, according to reports, may be raised to 2 or 3 years. There is also no limit on the tax-free gains, which might be capped at a high amount. Currently, there is a 15% tax on stocks sold within a year; this may be increased to 20%.
 

No Tax Payments on Pension Income:

Another populist announcement, which many are demanding from some time now, is the pension income for senior citizens be made completely tax free.

This will not only help the elderly but will also reduce operational work for income tax authorities.

Like every other year not all expectations were met in the Budget speech of 2016 and these unmet expectations form the basis of our expectations from the Union Budget 2017. For starters, many experts were of the opinion that the tax exemption slab for individual tax payers would be raised from the current Rs. 2.5 lakhs level to a new level of Rs. 3 lakhs per annum. That of course did not happen, so this may be something to look forward to this year. 

Another announcement in the Union Budget that led to protests across the country was the introduction of a new tax regime on schemes such as EPF. Currently, EPF is completely tax exempt but the 2016 budget showed an intention to make 60% of the corpus taxable at the time of withdrawal (NPS withdrawals are already similarly taxable). Thankfully this decision about EPF was retracted soon after due to protests across the country. However, there is still a possibility that such an attempt would be made again in the Union Budget 2017 or in another one in the near future.

There is saying “There are only 2 certainties in life – death and taxes” and if historic records are anything to go by, you don’t need a crystal ball to predict that the taxes of alcohol, tobacco, luxury goods and precious metals/gems will increase. The only question is by how much. Then there is the new player in the tax space to contend with as well – GST. The certainty about GST is that it will be introduced during the 2017-2018 fiscal. The uncertainty is whether it will be introduced in its current form which has polarised opinion or in a more watered down and less polarised format with amendments. Only time will tell and in 6 odd months we will have a definitive answer to these and other questions regarding Union Budget 2017.