High Expectations for Tax Cut from Budget 2015-16
The upcoming budget has many expectations riding on its announcements, especially with reference to tax reliefs for companies and individuals. The key points in the 2015-2016 budget are expected to be affordable housing, tax benefits and provisions to the common people. Focus will be on encouraging savings and improving the spending power of common man.
Officials from the Finance Ministry have stated that revision of tax slabs for individuals and companies will definitely be announced in the upcoming budget, with the hope of deterring companies from relocating to more tax-conducive countries. This is because the government’s Make in India policy is supposed to kick start the investment cycle and refocus investments on India instead of other countries, with a particular focus on manufacturing and housing sectors. The tax structure would need to go a long way to encourage companies to invest in India. The Government is faced with a fiscal deficit target of 4.1% predicted for the coming fiscal year.
The corporation tax rate, including cess and surcharge, stood constant at 33% for the last seven years, although the surcharge has been changed on and off, with a reduction by 5% in 2014. It is clear that the Indian tax payer is looking for some major relief from the Budget.
For the Indian tax payer, expectations come in the form of tax cuts, deductions, relief and less complicated tax structures to navigate. Some of the most important expectations include increase in the tax exemption limit, which currently stands at 2.5 lakhs and which, if increased, could trigger positive spending trends in spending power and the influx of money in the economy. Also, there are expectations to broaden the tax base of net wealth, which is currently at 1% if the net wealth is more than 30 lakhs. There are also hopes pinned on announcements concerning education allowance, transportation allowance and medical reimbursement limits due to escalating costs in health and medicine.
There are also hopes for deduction in mediclaim insurance premiums to be increased to Rs.50, 000 from Rs.35, 000. There are also discussions about the Tax Administration Reform Commission or TARC, to make tax matters more flexible and less complicated. With regard to TDS, the recently instated Standard Operating Procedures (SOPs) aim to give tax authorities more options to handle TDS problems quickly.
Primarily, the Budget will see the government’s important projects, including the Smart Cities project, getting much leverage, including upcoming special economic zones to see reduced alternate tax and dividend distribution taxes. The government may also rationalize duties and set the differential MAT rate at 5% to 10%. The government is also expected to give incentives to banks that are losing money over zero-account bank schemes.
The most important takeaway from the budget could be tax rate cuts and rebates, in order to boost middle income spending and to ease the burden on the salaried class with high-income groups being expected to bear burdens. The inheritance tax is also expected to make a comeback. It was scrapped in 1985 but the estate tax has been on the finance ministry’s radar for some time now. They would only apply to enormous inheritances, above Rs.25 crore. This will raise revenue and ease tax burdens off mid-income groups and better redistribution of wealth. The inheritance tax is in practice in places like the US, where it is at 40% of the total value of the inheritance.
Another good scheme is that of the tax incentives given to companies that participate in the Swach Bharat Abhiyan and Clean Ganga projects as part of their Corporate Social Responsibility spending.
