Union Budgets have always been highly anticipated events - not only by the tax payers, but by all types of businessmen, stock market operators, farmers and social sector. It is not only about revenues, expenditure, taxes and reliefs - but also about the pattern of government spending and the message it sends across.
Budget 2017 is different from the previous budgets from two angles - this is the first budget where Railway budget will be merged with the General Budget; secondly, it is being placed one month ahead (1st Feb instead of 28th Feb), so that the detailed plans and actual funds are available on 1st April itself.
Let me place my expectations on the forthcoming budget in the following areas:
FULL COVERAGE: UNION BUDGET 2017-18
Direct Taxes Relief
Lot of observers have already predicted that there will be relief in direct taxes - both personal and corporate. Regarding personal income tax, there is a need to enhance the basic exemption limit from Rs. 2.50 lacs to Rs. 3 lacs, and I don't see a possibility of much scope for reduction in the slabs, per se.
However, for Very Senior Citizens, there can be one more slab at 70 years of age (currently available at 80 years). I don't foresee further incentives for Savings.
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Finance Minister has already hinted at some reduction in Corporate Tax, which I expect to be not more than 5 per cent. However, removal of all cesses or surcharges is more important, and will be welcome both by tax payers and tax administrators.
Capital markets should gear up for a higher contribution to tax revenues. While there could be some modifications under various parameters, I am expecting that the Securities Transaction Tax to marginally go up.
Given the recent publicity for gold purchase post-demonetisation, I am concerned that there will be a temptation to impose a Wealth Tax on bullion. This should not be done, as it results in lot of implementation problems, and harassment of ordinary citizens.
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Basically, our manufacturing industries need support in withstanding competition from China or other large manufacturing and exporting countries. In particular, I should mention the steel sector, which has suffered badly over the last year. The budget should provide protection to domestic steel manufacturers, by way of anti-dumping duties, or control imports through Exim policy tools such as Minimum Import Price etc.
Given the current challenges being faced by Real Estate industry, any measures to reduce the cost of inputs - cement, tiles, sanitary items, accessories, etc., would be helpful.
Import of electronic items is a big drain on our foreign exchange, and there should be incentives for local manufacturing. Component manufacturing should be duty-free, while import of finished products should be subject to duty.
I expect implementation of GST to be delayed beyond 1st April 2017. I would be happy if it comes at least by 1st Oct 2017. This in itself is considered as a game changer, and we can expect that by FY19, all the loose ends would have been tied up.
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The Prime Minister has already announced many schemes to the rural poor and other weaker sections in his 31st December 2016 address. Various interest subvention schemes are the most important among them. I am happy about this, as this will encourage the borrowers - both in terms of agri loans, as well as affordable housing loans - to be prompt in their payments, in order to avail the benefits of subsidy. It will also remove the expectation of total loan waivers, which, unfortunately, the previous governments, and some State governments have brought in.
Lastly, I have to make a special mention about the needs of Public Sector Banks. PSBs are essential pillars of our country's economy, and government depends a lot on them, as was clearly demonstrated when the Demonetisation scheme was implemented. These banks are now suffering from bad debt problem and need large infusion of capital. The amount of Rs. 75,000 Cr indicated in the last budget is clearly insufficient. I expect the budget to address this issue.
Vivek Kulkarni, IAS (Retd), Founder MD, Brickwork Ratings & MSR Manjunatha, Director-Ratings, Brickwork Ratings