NEW DELHI: Traders and business community is expecting major changes in tax structure in coming budget, presented by Finance Minister, Arun Jaitley.
They said that the direct tax rates may be in for a major overhaul in the budget. Among the most significant measures that finance minister Arun Jaitley is likely to announce in his much-anticipated budget on February 28 could be a recast of the direct tax structure, with the government looking to clean up levies on individuals and companies to create an investment-friendly regime and boost consumer sentiment.
“Personal income tax and corporate tax structures could see a significant revamp, leaving more money in the hands of individuals and with companies,” they said.
“The idea is to spur investments and remove unnecessary hurdles,” said a government official, adding that deliberations were still going on. Budget 2015 may propose significant changes in income tax and corporate tax structures, boost savings A revamp of tax slabs for individuals and incentives to encourage savings and investment in housing could be taken up as part of the package as the government is not just keen on giving some relief to the common man but also wants to provide a boost to financial savings.
Financial sector regulators including the Reserve Bank of India have also favoured increased incentives for household savings.
The revamped national numbers show that the savings rate fell to 30% of gross national disposable income (GNDI) in 2013-14 from 33% in the year before. The exact quantum of relief is not yet known.
In its first budget, the government had raised the exemption limit by Rs 50,000 but tax slabs were left unchanged. Similarly, the Section 80 C limit that offers tax rebates for investments and on home loan interest payments were raised by Rs 50,000 each.Though muted tax revenue growth and the need to set aside more funds for development leave little room, the government is keen to improve consumer sentiment, which is now being regarded as a quick way to revive the economy.
There is limited scope for indirect tax reforms with the goods and services tax set to be imposed on April 1, 2016, compared with direct taxes, which have seen multiple changes over the past few years, rattling overall business sentiment.
The focus, another official said, will be on providing a healing touch by bringing clarity in some of the complicated tax provisions that have hurt the country’s image as an investment destination.
Industry views the upcoming budget as a make-or-break one and is looking to Jaitley’s effort to kick off an investment cycle. Companies want a stable and non-adversarial tax regime. Industry chambers including Ficci, CII and Assocham have also sought simplification of the tax structure.
