Budget expected to focus on direct taxes

Budget expected to focus on direct taxes

Context

While there are unlikely to be any major changes in indirect tax as most of them are now under the purview of the Goods and Services Tax Council, Budget 2018 could have several positive changes on the direct tax side, according to analysts.

Effort will be to ensure any cut in rate doesn’t hit revenue

The key consideration while reducing direct taxes, either for individuals or corporates, would be to ensure that the changes don’t reduce government revenue too much, as there is already the possibility of overshooting the fiscal deficit target.

‘Archaic limit’

• “The other thing that could change is the medical reimbursement limit of ₹15,000, which is an archaic limit. So that could go up.
• The last thing is that the income tax slabs could be tweaked.”

Long term capital gains tax

There is a chance the government may introduce a long term capital gains tax on equity shares, or may remove the dividend distribution tax.

Changes in corporate tax

There could be some changes on the corporate tax front as well, according to analysts, but they added that the government will be careful with these in order to minimise the impact on the exchequer.

No cut in the excise duty on fuel

Against the backdrop of consistently rising oil prices, there has been an increasing demand for a cut in the excise duty on fuel. However, indications from both the government and the private sector suggest that this will not happen in this Budget.

Farmers a priority

“I believe that our first priority is to find out a solution for our farmers who are in distress,” Mr. Modi had said, perhaps indicating that the Budget could have measures to ease the plight of farmers, and boost agriculture.

Not in favor of a populist budget

Overall, however, the Prime Minister said he was not in favour of a populist Budget, something both Mr. Subramanian and Niti Aayog Vice Chairman Rajiv Kumar have reiterated.