Tax cut to boost in investment, govt all set for big fat Budget day -
Tax cut to boost in investment, govt all set for big fat Budget day
Posted 18 Jan 2020 03:38 PM


The Year 2020 has a lot of speculations regarding budget and financial changes in the country. All eye in on 1 February and Finance Minister, Nirmala Sitharaman for seeking relief on tax slabs for salaried including steps to overcome fiscal deficit along with the addition in the consumer demand. In the current situation where economists are revealing no signs of revival and improvement because of GDP at 11 years low 5% and fiscal deficit which has increased from 3.3% to 3.6%, this budget is the only hope for the survival of the Indian economy. Interestingly, this is also the second budget of the Modi Government of his second tenure.

Few great expectations from the budget 2020:

* To boost investment 80C tax slabs rate may increase:
In the year 2014, the limit under section 80C had increased to 1.5 lakhs. If the limit would, increase then will definitely boost investment and increase household savings of common man. Archit Gupta, Founder, and CEO, ClearTax says-“It’s time to relook at this limit. While an increase in this limit would obviously lead to lower taxable income and therefore less tax payable, it would also lead to a higher disposable income. This situation could give the essential push to consumption while at the same time it would lead to higher household savings. Moreover, it could be a good economic move, while on the revenue side; it would lead to a lower tax collection, which the government may have to find a suitable way to compensate for. If this happens, it may be possible for a salaried person to have tax-free income up to Rs 8.75L by claiming a standard deduction of Rs 50,000, Rs 2.5L under 80C, Rs 50,000 under NPS (Section 80CCD (1B)) and medical insurance of Rs 25,000 under section 80D.”

* Personal income tax rate cut slab:
There is a buzz that the finance minister may relax the personal income tax slab rates. Currently, income up to Rs 2.5 lakh is exempt from tax. However, income from 2.5 lakh to 5 lakhs has to pay 5%, 20% for income slab from Rs 5 to 10 lakh and 30% for income slab from Rs 10 lakh and above. No doubt, a tax rate cut from 20% to 30% would increase the additional income in the hands of the middle class. This will boost the investment sentiments in the country. Economists expect that personal tax slab rates exemption from 2.5 lakh may increase to five lakh rupees.

* The tax rate for LLPs and Partnership firms:
There is tax cut-rate for corporates from 30% to 22% and other manufacturing companies by the government but partnership firms and Limited Liability Partnerships still pay 30 percent tax that excludes the surcharge and education cess. This is no doubt very high for them. To boost the MSMEs section the government may take some steps and rethink to cut the tax rates for small and medium enterprises along with some capital incentives for the MSME section.

* Sector-wise tax rate cut:
From the last few months sectors like power, infrastructure, real estate, NBFCs, agriculture. The auto sector are suffering from lack of funds and demand in the sector. Although the finance minister tried to solve some of these sectors' financial crisis, still the homework is lacking before the budget 2020. Therefore, we can expect that the government may give stimulus abet for some of these major sectors by issuing long-term tax-deductible infrastructure bonds to work out in a better way to boost demand and supply both.

Few more that we can expect from the big fat Budget Day:
* FM may increase the distribution to farmers through Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS). In addition, with the help of PM-KISAN scheme, the disposable income may increase to improve the standard of living
* The auto sector expects a rate cut in automobiles from 28% to 18 % from this budget
* LTCG rates may decrease which will boost the long-term investors' sentiment in the share market
* To enhance the electric car vehicles sale in the market, custom duty on lithium-ion batteries may decrease
* For the pharma sector, to heighten up the R&D section Government may give some benefits. This may amortize the cost of research and development (R&D)
* Import duty on paper, tyre companies may increase in the budget
* FM can cut the raw material rate cut to boost domestic suppliers. But we can expect some rate changes in the final material as well
* New GST returns may also be in the table of the FM in 2020 budget

Last but not least, Indian economy is going through the worst and many economists expect that worst is still knocking the doors to come in. So, all is in finance minister’s supremacy now to take major steps related to sector-specific, farmers and the common man. By fitting the backbone of the economy automatically, the consumer demand will revive and is a much-needed step to relook in the 2020 budget.

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