Union Budget 2017 – Income tax relief v/s Corporate tax relaxation

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

 

Ronak R Choksy, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

_________________________________________________________________

Perhaps the only other thing in India that gets as much attention as cricket and Bollywood, is the Union budget. There already are a lot of eyes on the budget session that is coming up on the 1st of February. This year’s budget is special due to a number of reasons. Firstly, for the first time, the Union budget and the railway budget are going to be announced together and on February 1 instead of the usual February 28. Secondly, Uttar Pradesh Legislative Assembly elections are due in February. A populist budget has the potential to turn around the UP elections in BJP’s favour. And most importantly, this will be the first budget after Prime Minister Narendra Modi’s bold demonetization move in November.

Demonetization has reduced people’s spending. There are concerns over slower GDP growth of our country as a result of demonetization. IMF has cut India’s growth forecast to 6.6% from 7.6% after demonization. Hence, most people believe that the government might relax the income tax slabs to boost public spending and get the GDP back on track. According to most newspaper speculations, basic tax exemption limit should be increased to from the current Rs. 2.5 lacs. But in my opinion, such a tax relief will not help much in boosting spending because only 1%-2% of the Indians (or roughly 4% of labour force) pay taxes. Instead the budget might focus more on boosting agriculture and rural economy as they were the most hard-hit among all. The government may also consider lowering corporate tax rates to enhance the economic growth. Lower corporate tax will boost corporate investments in research and development and infrastructure and will also create more employment. This will also attract more foreign investment in India. Lower corporate tax may not necessarily mean lower revenue for the government. In fact in the past we have seen an increase in government revenue after lowering corporate taxes. Hence as compared to relaxing income tax, decreasing corporate taxes makes more sense in this situation.

Advertisements

Union Budget 2017 – Expectations

The following article is based on my own interpretation of the said events and/ or publicly available information. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Nikunj Agarwal, MBA 2016-18, Vinod Gupta School of Management, IIT Kharagpur

The Election Commission on Monday gave its approval to present the Union Budget 2017 on 1 February ahead of the assembly elections, but said no schemes related to the poll-bound states can be announced. This time Union budget will be announced one-month in advance, instead of the traditional practice of declaring it on last day of February. The government had pitched for an earlier budget date, instead of the traditional 28 February, to complete the legislative part of financial business before 1 April, the start of a financial year.

So, the countdown for Union budget 2017 has already begun and following are the expectations of public from Budget 2017-

Cashless Economy – Since this budget would be the first budget post demonetization, the government is expected to come with schemes to promote cashless transactions. Discounts on card payments, discounts for toll booth payments using cards, waiver of merchant discount rates when using debit cards at POS machines, etc., have already been implemented. Additional benefits to promote people to go cashless through credit cards, debit cards and mobile wallets, apps are expected to be part of the Union Budget 2017-18.

Relief for farmers- Farmers were severely affected by demonetization as they could not sell their crops due to unavailability of sufficient new currency notes. To compensate for the pain, the government is expected to announce some schemes for the welfare of farmers.

Salaried Class – Salaried class people would be looking for some relief in Income Tax from Union Budget 2017. The government is expected to revise Income tax slab to provide some relief to common tax payers of the country. The current income tax limit is Rs 2.5 lakh, and the government is expected to increase this limit to Rs 4 lakh.

It is further said the budget is expected to aim at corporate tax rationalization, promoting ‘less cash’ economy and higher spending on rural sector, affordable housing and public infrastructure. Nomura expects the fiscal deficit target of 3.5 per cent for 2016-17 to be met and to be consolidated further to 3 per cent of GDP in 2017-18.

References-

http://economictimes.indiatimes.com/news/economy/policy/budget-to-focus-on-fiscal-consolidation-path-nomura/articleshow/56758823.cms?adcode=201

http://economictimes.indiatimes.com/news/economy/policy/mr-jaitley-these-are-five-key-expectations-from-budget-2017/articleshow/56737790.cms?adcode=201

http://www.livemint.com/Politics/n6lCFsycEHLhhAuU1gkT0M/Budget-2017-Election-Commission-allows-1-February-date-but.html