It’s 2018 and once again the finance minister will present the financial budget of 2018. Middle-class families can expect for a massive relaxation in the 2018-19 budget, so that it will also be the closing ordinary finances budget of the NDA government, as the finance ministry is taking into account to hike private tax exemption limit and pinch the tax slabs, according to sources.
The proposals before the ministry is to hike the tax exemption restrict from the existing Rs. 2.5 lakh per annum to at the least Rs. 3 lakh if no longer 5 lakh, they stated. Beside, the present tax slab is also being actively taken into consideration with the aid of the ministry to provide extensive relaxation to the center-earnings organization, mainly the salaried class, to assist them tide over the impact of retail inflation, which has started inching up.
In the previous budget, Finance Minister Arun Jaitley left the slabs unchanged however gave marginal alleviation to the small taxpayer with the aid of decreasing the fee from 10 % to 5 % for people having annual profits between Rs. 2.5 to 5 Lakh. In the next budget to be unveiled on February 1, the government should lower tax rate by 10 % on income among 5 Lakh to 10 lakh, impose 20 % for the income between Rs. 10 lakh to 20 lakh and 30 % for the people whose income is above than Rs. 20 lakh. At present, there is no tax slab for earnings among 10-20 lakh.
“Considering the steep rise in the value of living because of inflation, it is recommended that primarily restricts for exemption and other income slabs must be more suitable to present benefit to low-income groups. The income trigger for peak rate in other countries is significantly higher,” enterprise chamber CII (Confederation of Indian Industry) stated to the finance ministry in its pre-budget memorandum.
Even though the industry chambers want from the government to reduce high tax slab to 25%, unlikely that the ministry will agree with that because of pressure of fiscal deficit. The subdued indirect tax collection the following rollout of GST from July 1 last year has made pressure on the fiscal deficit, which has been pegged at 3.2 % of the GDP for 2017-18.
Recently the government increased borrowing target with the aid of additional Rs. 50,000 Crore for the current fiscal to catch the shortfall.
According to industry body Federation of Indian Chambers of Commerce & Industry (FICCI), there is a chance that demonetisation results may linger on for a few more months and therefore there may be a need to boost demand and consequently, the government should consider revision of income tax slabs, by increasing the income tax slab on which higher tax charge might trigger. “This would enhance buying power and create additional demand. For individual taxpayers, 30 per cent tax fee should be applicable only when income is above Rs. 20 lakh. Additionally, interest rates should be reduced to enable affordable finance for conducting enterprise operation and expansion,” it stated.
Among other things, chambers have suggested to re-advent of the standard deduction for salaried employees to at the least Rs. 1 lakh to ease the tax burden of them and retaining in mind the rate of inflation and buying capacity of the salaried individual, that depends on salary disbursement. Standard deduction, which was available to the salaried people on their taxable earnings, was abolished with effect from evaluation year 2006-07.
Overall we can assume that this budget can give a middle class Working Indian a great relief by providing better Tax Exemption in upcoming Union Budget 2018. It’s still a mystery and it will be clear on Feb 1, 2018 once Mr. Arun Jaitley will present the Union Budget to the Nation.