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We're just a day away from the Union Budget 2017-18. Come tomorrow, Arun Jaitley will don the mantle to provide a roadmap on how the government plans to manage the Indian economy for the year ahead. There's speculation all around, especially on the taxation front...
What will Jaitley do? Will taxes be cut for the common man? What about corporate India? Will the rich get taxed more? The din of analysis sounds everywhere. Let us address these questions by keeping some major things in perspective...
Each year, taxpayers look towards the finance minister to bring in some good news. And this year is no exception. In fact, the topic is more sought out this time around, thanks to the government's demonetisation move. There are many requests made to Finance Minister Arun Jaitley to expand the income tax slabs.
An article in Firstpost mentions accounting regulator ICAI suggesting an increase in tax exemption limits and expanding the taxation slabs. The ICAI has suggested nil tax on income from Rs 0 to 3 lakh. This is against the present slab of Rs 0-2.5 lakh. Further, it has suggested 10% tax on income from Rs 3-10 lakh, 20% from Rs 10 lakh to 20 lakh, and 30% on Rs 20 lakh and beyond.
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On the corporate tax side, the proposal is to bring down the tax rate to 25% over four years beginning this year.
But will it be in India's best interest to cut tax rates?
Maybe so. After all, a relaxation in tax rates could encourage more people to disclose their income (which is the need of the hour). If that happens, it will mean more revenues for the government. And if the government plans it through, these revenues can be strategically used for the development of the economy.
Also, a reduction in tax rates will prop-up public consumption and private investments. This will further aid the growth of the Indian economy.
What we also 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.
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