Tax relief is expected both by personal income tax and corporate tax payers in the Budget 2018. One of the most anticipated developments from the Budget 2018 is revision of the tax slabs.
Tax relief is expected both by personal income tax and corporate tax payers in the Budget 2018. One of the most anticipated developments from the Budget 2018 is revision of the tax slabs. There have been proposals made to the FM for revision on both tax slabs for personal income tax payers and reduction of tax rates for corporate tax payers. In all the surveys conducted by various media houses and financial bodies, it is widely believed that the raise in basic exemption limit on personal income tax is a done deal. Other than that, there are also various other expectations and desires of various sectors and entities from the FM. For common man an increase in the exemption limit under Section 80C, increase in medical reimbursement component, tax sops for investment in life, health insurance and pension plans and tax sops for first time home buyers are also on the wish list of many. Due to prevailing fiscal challenges the government doesn’t have much room for manoeuvring; the government will have to somehow keep the revenues generated from taxation intact. One of the ways of doing the same is through reintroduction of long-term capital gains (LTCG) tax on equities in place of securities transaction tax (STT) or along with it. But other than these issues, the two big decisions that the FM will have to make will be about personal and corporate tax rates.
Union Budget 2018 and Personal Income Tax
In the last full budget before the general elections in 2019, it is highly likely that the government will tweak the income tax slabs. The Budget 2018 will have to be both practical and populist at the same time because of the upcoming assembly elections in multiple states and due to the fiscal discipline that the government will have to observe. One of the major expectations from the Budget 2018 is that the basic exemption limit of 2.5 Lakhs will be raised to 3 Lakhs to put extra cash in the pockets of the middle class. Due to demonetization and resulting slowdown in demand due to cash crush experts believe that the said move is almost a done deal. In fact the said move was widely expected in the Budget 2017 itself but then the FM choose to reduce the rate of taxation for income between Rs 2.5 lakh to Rs 5 lakh from then prevalent 10% to 5%. Other than tweak in the income tax slabs an adjustment in the tax rates can also be expected in the Budget 2018. Currently an individual pays tax rates of 5% for income between Rs 2.5 lakh and Rs 5 lakh and 20% for income between Rs 5 lakh to Rs 10 lakh which is the next slab. Thus tax rate of 10% on any income slab is missing which can be introduced accordingly.
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