Being employees and senior citizens. Limit for deduction

 

Being 2018-19, a pre-election year as the Lok Sabha Elections
are around the corner in the year 2019, Government is most likely going to come
out with a populist budget in February 2018. Popular belief is that, budget is
going to provide relief to the common man as well as business class post the
two major changes that our economy has witnessed in a short span of time i.e.
Demonetization in 2016 and implementation of Goods and Services Tax in the year
2017. Significant liquidity issues were caused in the economy with the
announcement of demonetization but it was a commendable decision for combating
the black money. GST being highlighted as a game changer has already gone past
the initial teething issues.

India has jumped 30 places and 53 places in Ease of Doing Business
rankings and Ease of Paying Taxes category respectively as per the rankings
released by World Bank. Government would further like to improve these rankings
in the years to come and policies and measures shall be formulated in this
direction.

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Considering the Lok Sabha Elections in the year 2019, the
expectations of “feel-good” factors in the budget are pretty high. This
budget might have a series of populist policies. The following are some of the
key expectations from Budget 2018-19: 

 

Direct Tax Structure

Changes are bound to occur in the current income tax slabs but
common man should not expect any miracles. Budget is likely to increase the
exemption limits for salaried employees and senior citizens. Limit for
deduction under Section 80C and Section 80D might also be increased to please
the masses. Some media channels have already reported that the Government is
planning to revise the current slab of Rs. 2.5 lakh to Rs. 3 lakh per annum as
the minimum taxable income. Underline fact is that any upward revision of the
minimum taxable income slab will be equally welcomed both by the salaried and
self employed class.

Standard deduction for salaried employees might be reinstated to
ease the tax burden of the employees. This shall also help in reducing the
disparity between the salaried and business class with the latter being
eligible for deduction of expenses incurred by them for earning their business
income.

Exemption limit of Transportation allowance under Section 10 is
likely to increase to Rs. 2500 per month considering the rising fuel costs and
resultant conveyance costs. Finance Minister is likely to make some
announcement regarding the upward revision of exemption limit of Education
Allowance and Hostel Allowance considering the rising inflation and cost of
education. Expectations are also high to hear the announcement regarding the
increase in the exemption limit in respect of the sum paid by the employer to
employee on the medical treatment i.e. reimbursement of medical expenditure.

Limit of deduction under Section 80TTA in respect of Interest on
Deposits in Savings Account might also be increased from existing Rs. 10,000 to
Rs. 20,000.

The Finance Minister while presenting Budget 2015-16 promised that
the rate of Corporate Tax shall be reduced from 30 per cent to 25 per cent over
the next four years with corresponding phasing out of exemptions and deductions.
Different industry bodies during the pre-budget meet has already urged to the
Finance Ministry to lower the Corporate Tax rates. To encourage the investments
from the International and Domestic Investors, an announcement to reduce the
Corporate Tax rate to 27% is most likely expected though rate of surcharge on
tax is going to remain the same. Business ecosystem will become more attractive
with the lowering to Corporate Tax rates. Changes are also likely to be brought
in the rates of Dividend Distribution Tax.

Reduction in tax rates is also likely to be announced for
firms/Limited Liability Partnerships (LLPs). Reduction in tax rates for these
entities would facilitate ease of doing business in any form and shall not
particularly restrict the benefit to Corporates.

 

Indirect Tax Structure

Expectations are very high as this will be the First Budget after
the implementation of Goods and Services Tax popularly known to GST across the
country. Central Government focus and interest and their reliance on the
Indirect Tax policy of the country are likely to be demonstrated.

With the implementation of GST and overcoming the initial teething
issues, there are several other critical issues which require resolution. Clarification
is required on issues like Anti-Profiteering Compliance Mechanism, Apportionment
of Credit and Blocked Credits, procedural compliances, proper refund mechanism
especially for exporters along with the time frame within which the refund will
be credited etc. 

GST Registration requirement for Non-resident for entering into specified
transactions with registered persons might be done away with as it is acting as
a big deterrent for foreign individuals coming to India and providing the
technological support to Indian businesses.

Amendment is also likely to be expected in the definition of place
of supply of accommodation service. This will help in extending the seamless
flow of credit and avoid any harm to the tourism industry.

Amendment is also expected in the GST laws to allow input tax
credit to the customer provided he has made the payment of invoice along with
tax to the supplier. At present, input tax credit was available only if the tax
charged in respect of the supply has been actually paid to the Government by
the supplier of goods and services.

Expectations are also high from the Finance Minister to change the
periodicity of filling of GST returns from monthly to quarterly for all the
taxpayers though the payment of tax can be made monthly for taxpayers having a
specified aggregate annual turnover. This will lead to simplified compliance
mechanism and will boost the confidence of tax payers by reducing the much
added compliance burden on the taxpayers. 

 

Digital India and Make
in India

Further policies and reforms are expected towards the ‘Make in
India’ and ‘Digital India’ initiatives considering the focus that Central
Government has given to these initiatives over the past few years. Some tax
breaks might be offered to boost these initiatives.

 

 

Measures to Promote
Cashless Transactions

Taking into account the government’s measures to promote the
Cashless Transactions, the next budget is also expected to announce additional
benefits to those opting for cash less transactions through debit cards, mobile
wallets and credit cards.

 

Investment in Railways

Modernization of Indian Railways
is long overdue and the Finance Minister is expected to give further impetus to
government spending on railways modernization. This budget might introduce
measures that focus on further development of railway infrastructure. Like
every year, we can expect the launch of a few new trains. Reduction in
passenger fares for non-A/C classes is also expected to boost positive
sentiment among voters in the lower economic strata but don’t expect premium fares
to get reduced in this budget.  

 

Affordable Housing

Government is likely to continue
with the benefits of offering cheaper home loans to individuals and promoting
the low cost housing as announced in the last year’s budget. These benefits
might be extended for the 2018-19 period.

 

Taxes on Tobacco,
Alcohol, Luxury Goods

Alcohol and Tobacco products have been the perennial source of
revenues for the Indian Government over the years. Historically, almost in
every budget, the prices of the tobacco products and alcohol have been
increased. Expect that this budget will be no different. To increase the
indirect tax revenues, the price of imported goods such as high-end
electronics, imported luxury cars etc. are also likely to increase.  This will have a positive impact on the budget
deficit and will also promote the Make in India initiative.

 

This article is all about the
expectations from the Union Budget 2018-19 as this budget is expected to be
different from many of the previous ones. 
The top agenda of the government would be to create a positive feeling
for the future among the masses considering the Lok Sabha elections are around
the corner in the year 2019 as well as to boost the investor confidence.

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