MUMBAI: Taxes are anything but certain for Indian Prime Minister Narendra Modi. Faced with a slump in demand after his shock clampdown on cash, he’s expected to lower taxes in the Feb. 1 budget to spur consumption. The risk is that a cut will rob Modi of a short-term revenue spurt, which his administration had been touting as proof of success of the currency policy change.
“Economic growth is unlikely to accelerate in the near term on its own so the situation for the government is such that in order to improve their own credibility, the government will have to improve demand for goods and services,” said Nihal Kothari, executive director at tax firm Khaitan and Co. in Mumbai. “So the personal income tax slabs or rate may be reduced in the budget to give higher purchasing power to consumers.”
We assess the sustainability of the tax revenue surge amid expectations from the budget.
