Union Budget 2019: Why expectations on income tax, farmers and corporates are running high
Finance Minister Nirmala Sitharaman will present the Union Budget on 5 July. Here are three key sectors of prime concern. Will their expectations be met?
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It is budget-eve and like everyone in the country, we are biting our nails, hoping for our pockets to be jingling more and our bank balances to look better starting tomorrow.
Here are some expectations from three key sectors that form the core of the Indian economy — individual taxpayers, agrarians and the corporates.
On the tax front, taxpayers would be looking forward to a higher tax exemption limit for individuals — from the current Rs 2.5 lakh to Rs 3 lakh of their annual income. The hope arises from the fact that besides media reports suggesting its probability, soon after Arun Jaitley took charge as the Finance Minister in 2014, he had raised personal income tax exemption limit from Rs 2 lakh to Rs 2.5 lakh in his first Union Budget.
Taxpayers would expect a similar turn from Nirmala Sitharaman.
Further, the taxpayer could also be looking at increasing the tax exemption limit for savings and investments made under Section 80C from the current the ceiling of Rs 1.5 lakh to Rs 2 lakh or more.
Will the Budget reduce your tax burden? (Photo: PTI)
For those looking for more investment options, media reports have indicated that this Budget could see the re-introduction of tax-free bonds — those bonds on which the interest earned is not taxed. Besides serving the purpose of raising capital by government entities for infrastructure projects, the bonds could leave more tax-free interest income in the hands of the taxpayer, and thereby try to push for an increase in the consumption spending that has seen a slump in the last few years.
However, before we get ahead of ourselves, let’s not forget there is very limited room for the Finance Minister to give huge tax sops to the middle class owing to the requirement to keep the fiscal deficit under tight control.
History stands as witness that this sector has the power to make or break governments in India.
The farming sector is in severe distress — there is an urgent need to address and improve farmers' income level. We expect the Fin Min to provide a variety of sops to farmers, like incentives for adopting better farm mechanisation to improve yields and incentives to building infrastructure to promote farm to fork concept, to improve farmers' realisation for their produce.
Bringing in better incentives for storage will help reduce farmers' distress. (Photo: PTI)
Schemes like Pradhan Mantri Fasal Bima Yojana (PMFBY) help address farmer distress with crop insurance, and we expect the government to expand the outreach of such schemes across the country, with sharply focused efforts on equipping farmers with the know-how to report and make claims under the scheme. However, if there could be structured efforts around reducing crop losses, the need for insurance might be greatly reduced. After all, prevention is always better than claiming insurance, right?
We hope for incentive in creating storage facilities to ensure better shelf life for agri produce. Further, enhanced storage facilities mean reduction in losses/wastages and will allow farmers to sell the produce as per their convenience and provide loans at cheaper rates against such produce.
One of the touchiest topics on agri-nomics in India is the MSP.
While farmers could keep their fingers crossed for a further increase in MSP, let us not be blinded to the fact that such an increase could also lead to inflation. (Just a word of caution, Minister).
Modi, with his thrusts for India Inc. even in his first term, proposed a reduction in corporate tax rates in 2015. However, in spite of all the love, the fact is that India has one of the highest corporate tax rates amongst competing economies across the world — this has clearly been taking a toll on the “ease of doing business” index. Moreover, the reduced tax rate announced in 2015 was not applicable across the board, but only to a certain category of corporates which fulfil specific criteria.
Under such circumstances, India Inc. will expect the Fin Min to announce a universal corporate tax rate of 25% — no criteria or questions asked. The benefits will have to be extended to partnerships firms and Limited Liability Partnerships as well, thus allowing the benefits to flow into the Micro, Small and Medium Enterprises (MSME) sector.
PM Narendra Modi, flanked by Union minister Nirmala Sitharaman, at 'Make in India Mission', 2014. (File photo: PTI)
Further, with Modi being the face of start-ups in India with the flagship “Make In India”, the start-ups would now look at more convenience of creating and doing business, rather than compliance issues. This would allow more time for innovation and will foster economic growth. Media reports suggest that the start-ups and small-scale enterprises expect a single-window clearance and have sought faster payment processing and relaxation in certain Goods and Services Tax (GST) norms.
Of course each sector, structure and individual will have their own set of sky-high expectations from the Budget. But set against a grim economic scenario, we wish Ms Nirmala Sitharaman the best in being able to create and implement the best Budget for the Indian economy.