The Prime Minister Narendra Modi-led government is set to present its first full Budget on February 28. Expectations are running high with reforms being on the anvil across most sectors.
While the Budget wishlist is long, the Finance Minister should especially look into several crucial aspects regarding direct taxes such as lowering the corporate tax rates, reducing the rate of Minimum Alternate Tax and rationalisation of individual tax slabs.
For boosting domestic savings, the section 80C deduction should be increased from the current Rs 1.5 lakh. Government can also re-introduce deduction for infra-bonds to boost retail investment.
Dispute resolution mechanisms should be strengthened further. Steps may be taken to ensure that arbitrary and high-pitched assessments are discouraged. The government may consider enacting rules to ensure adjudication of appeals by authorities in a time-bound and efficacious manner.
Rationalisation of certain provisions alleviating concerns of corporate India should be considered by the government. Corporate Social Responsibility expenditure may be made a tax-deductible expenditure. Over the years, SEZs have become unattractive due to withdrawal of tax exemptions. In line with the PM's initiative of Make in India, MAT and DDT may be considered to not apply to SEZs to spur business activity.
Potential disputes arising because of lack of guidance should be addressed by the government. Indirect transfers of shares of a foreign entity have been subject matter of litigation and an express clarification defining the minimum threshold limit which would trigger taxability in India would be most welcome. Another flashpoint has been genuine loans given as part of business transaction and Inter-corporate deposits. These should specifically be excluded from the ambit of deemed dividends.