The Union Budget, to be unveiled tomorrow, is being awaited with huge expectations from every stakeholder. Here is the taxpayer and industry wish-list from Finance Minister Arun Jaitley’s budget which is widely expected to sacrifice the fiscal consolidation path to support economic growth in the country. Deepak Kapoor, financial analyst with ADC legal, points out what tax payers broadly expect from Jaitley.
RISE IN BASIC EXEMPTION LIMIT
Currently all incomes above Rs 2.5 lakh is taxed. Taxpayers expect Finance Minister to raise this limit to anywhere between Rs 3 lakh-5 lakh.
Rationale: This will put more money in the hands of lower middle class and will generate good consumption led demand. The international experience shows that lower taxation during recession is a much better tool than higher expenditure by the government.
INCREASING TAX DEDUCTION LIMIT
Taxpayers expect that deduction for interest on housing loan, presently limited to Rs 2 lakh, should be enhanced and revised periodically as the residential houses particularly in metropolitan cities have become very costly with the interest component normally far in excess of Rs 2 lakh per year.
Rationale: The expected relaxation will help the government realise its cherished dream of housing for all by 2022 and would also help the real estate industry to dispose off its excess inventory quickly.
An individual is presently entitled to deduction in respect of interest on deposits in savings account to the extent of Rs 10,000. No deduction is allowed in respect of interest on time deposits i.e. deposits repayable on expiry of fixed periods. The deduction should be allowed in respect of interest on time deposits also and the limit should be increased to Rs 25,000.
Rationale: This would give a boost to savings and will simplify the process of making investment in financial assets by Indians who for one reason or other are hooked to gold, land etc.
RELIEF FROM DELAYED POSSESSION OF HOMES
Presently the acquisition/construction of house should be completed within 3 years from the end of the financial year in which the capital is borrowed. The interest of pre- construction period is allowed in five equal annual installments commencing from the previous year in which the houses is acquired or constructed.
Considering the fact that most of the builders are trapped in liquidity crunch and are delaying possession, this period should be increased to five years.
Rationale: This would provide a needed relief to home buyers who have bought the house but are yet to take its possession.
INDUSTRY’s BUDGET WISH-LIST
A vibrant and non-adversarial tax policy: The businesses wants an end to tax terrorism which they feel impacts India’s image as friendly investment destination. FICCI wants government to give up the policy of setting tax collection targets for tax officers, as tax collections vary with the economic cycle or business conditions.
Step-up Public Investments: Industry supports government’s inclination to boost public spending to create infrastructure in the country. Such productive investments, particularly on infrastructure, would add to the productive capacity of our economy.
Sustain the reforms momentum: Businesses want the budget to facilitate the government’s ease-of-doing-business agenda.
Reduction in Minimum Alternate tax rate (MAT): As the government draws up plan to eliminate exemptions and reduce the corporate tax rate, it must simultaneously look at reduction in the Minimum Alternate Tax rate.
Focus on Housing: To achieve Housing for All target and promote affordable housing, the government should consider providing 3% interest rate subvention (as provided to exporters) for loan taken up to Rs 10 lakh. Stamp duty exemption may also be provided for such dwellings. A boost to housing and construction sector can help revive the fortunes of MSMEs as half of the goods used in such constructions come from MSMEs.
Make Make in India happen through focus on infrastructure: Besides ease of doing business, FICCI also feels the need to improve the cost of doing businesses in the country. In this context, the quality and availability of infrastructure assumes great significance. The government must leverage the annuity model, wherein private investors can recover their cost in a series of semi-annual payments from the government over the concession period.
Source: FICCI & PHD Chamber of Commerce