Budget 2017: Which,What,How Tax Benefits Can Impact Your Pocket?
Direct Taxes Budget 2017 – Income Tax
People of India will expect a lot in the budget 2017 from Mr. Modi, especially after bearing all the hardships under demonetization. Finance Minister had already said that he wants to increase the tax base as there are very less number of tax payer in the country as compared to the neat wealth possessed.
Basic Income Tax Exemption
With this expectation, should you see a rise in basic exemption limit for Income tax from INR 2.5 Lakhs to 3/3.5/4 Lakhs or Mr. Arun Jaitely might again give additional rebate for individuals earning less than INR 5 Lakhs.
What is the difference?
Increase in basic exemption limit gives advantage to all the tax payers under the scope and on the other hand Increase in Rebate gives exemption to a certain set of taxpayers community.
Let us try to understand with an Example
Example A: Individual Taxable Income Rs. 4 Lakhs. Then tax amount will be 10,000. You save tax of Rs. 5000 due to rebate available for taxpayers with income <5 Lakhs.
Example B: Individual Taxable Income Rs. 6 Lakhs. Then Tax amount will be 45,000 because the rebate of 5000 is not available for the individuals with income >5 Lakhs therefore no benefit was given to this category of taxpayers.1
Recommendation from FICCI
Federation of Indian Chambers of Commerce and Industry (FICCI) has recommended below rate of taxation for upcoming budget 2017.
Income Tax Rate
0-3 Lakhs NIL
3-10 Lakhs 10%
10-20 Lakhs 20%
>20 Lakhs 30%
This huge change in tax rates might be worrying from the government revenue perspective but this can be compensated with added advantage of increased tax base, lesser evasion and more accounted money. Government can also think about this measure if they see a sizeable increase in the Indirect Taxes revenue. This can also add to the “Acche Din ” slogan of the government as the reduced direct taxes add more utility to the citizens than the increased indirect taxes.
Taxfree Savings
Other scope of relief in taxation comes from taxfree savings cum investment options under the Income Tax Act. Limit of such investments stands at Rs. 1.5 lakhs. If this is raised then again the benefit is passed on to all the taxpayers but only if they invest some money out of their pocket. Their might also be some minor revisions for the salaried employee allowances benefits which might result in some tax savings.
Corporate Taxation
With his first budget speech Mr. Jaitely had already mentioned that he will now focus on slow reduction in taxation rates for corporate. In this direction no substantial step had been seen yet therefore, we might see any such major move in this budget as the government has already completed half of its tenure.
The Confederation of Indian Industry (CII) has recommended that the corporate taxation rate should be brought down to 18% to support the industry in trouble. Major reliefs expected are change in corporate tax rate or MAT rates. Also there might be some additional package benefits for entrepreneurs who accept their sales/service consideration through bank or online channels. With GST coming in, corporate community is eyeing big on this budget to get some relief promised by the government.
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