Will Budget 2017 Turn Tax-Friendly?

Tue, 17 Jan Pre-Open

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The Union Budget for FY18 is keenly awaited. First, it will be presented a month earlier than the usual date. February 1^st has been chosen as the date to present the Union Budget 2017-18. Second, for the first time, the railway budget will be incorporated into the general budget itself. Lastly, the budget is ripe with many expectations as the government looks to lift sentiment in the wake of demonetisation.

One of the more prominent expectations from the Budget 2017 is reduction in the tax burden for both individuals and corporate taxpayers.

During the ongoing financial year, the government took several measures that meant increased tax revenues for the government. Some of these actions included the Income Disclosure Scheme, stringent surveys conducted by the Income Tax department, digitisation, demonetisation, etc. And the consensus now is that these increased revenues will translate into a reduced tax rate in the upcoming financial year.

On the cards is a revamp of the income-tax framework for individuals and a reduction in the corporate tax rate. As per an article in The Economic Times, Budget 2017 will see a rise in take-home pay and a lower corporate tax rate.

For individual tax-payers, there is a proposal to widen the Rs 2.5-5 lakh slab and tax it at a lower rate. Further, the tax simplification committee has recommended the reintroduction of standard deduction. In simple terms, it refers to a deduction allowed in income tax, irrespective of expenses incurred or investment made by the assesse.

If these recommendations are accepted by finance ministry, it would result in surplus cash in the hands of taxpayers. An increase in take-home pay will spur overall consumption and, in turn, benefit the economy which has been adversely impacted by demonetisation.

On the corporate tax side, the government aims to bring down the tax rate to 25% over four years beginning this year. A reduction in rates here will mean rise in private investments.

That said, as we look towards the upcoming Union Budget for 2017-18, what we want is to see the government getting rid of the complicated layers of exemptions, and to have a simple and uniform tax rate which is lower than the current one.

This will not only make for better tax compliance by taxpayers, but also make it easier for the tax department to administer appropriate tax collections as well as reduce tax litigation.

Let's hope that with this one important change, this Budget goes down in history for all the right reasons.

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