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The Budget is likely to continue its pro-poor image with a slew of concessions for agriculture, skilled labour and the rural sector, along with incentivisation to move to a digital payment economy. Employment-related incentives are likely to go up considerably.
While direct taxes may come down, individuals with ´capacity to pay´ may not get tax concessions. In fact, conspicuous spending on travel, luxury items, boarding, branded clothes and accessories could see higher rate of taxation. Capital gains tax and related taxes on asset transfer may get higher.
-IMC desires that direct taxes are rationalised. The effective corporate tax currently is 23 per cent that could come down to 20 per cent, considering the need to boost manufacturing to generate employment.
All surcharges, cess and incentives should be withdrawn.
-The income computation and disclosure standards could be made more dynamic considering the concept of real income, rather than the mark-to-market concept.
-In the case of 100 per cent subsidiaries, the context of group taxation could be viewed from a new angle.
-A mechanism for regular reviews and automatic upward revisions in various threshold limits under the I-T Act needs to be built.
- To avoid unnecessary tax litigations, it is suggested that pre-assessment filters such as pre-rulings, mediation mechanism, or even referring potential cases to committees, could be considered by the government in consonance with the prevailing best international practices.
-To help international investors in their home countries, it is suggested that the dividend taxation (which currently is taxed thrice under the provision of corporate tax, DDT and tax of 10 per cent above a divided of Rs 10 lakh) needs to be rationalised.
-The capital gains tax on stock trading should be done away and the criteria for long-term rule should change to three years.
-More tax havens - other than Mauritius, Singapore and Cyprus, could be brought under double tax avoidance agreements to levy capital gains tax on investments routed through these countries.
-Budget should singularly be SME focused.
-Banks should reduce the rates of interest by at least 2 per cent to help especially the SMEs access funds at lower cost.
-Spending amounts ù for example Rs 25 crore on skill development and upgradation ùshould qualify for differential corporate taxation for corporates and lowered taxes for SMEs could act as an encouragement to create jobs.
-To encourage SMEs, corporates having a revenue of Rs 1,500 crore and over should have cells, which under their CSR programme mentor SMEs for skills, processes, tech, banking, and market access.
-The current rate of MAT at 18.5 per cent impacts the cash flow of companies. It was introduced for LLPs, HuFs and AOP, but if the LLP, for example invests in businesses, in backward areas, then too it is being taxed, leaving no incentives. The rates thus need to be progressively reduced to say 12-13 per cent, and the carry-forward of the credit should be increased from the current 10 years to a 15-year period.
-Excise duties on consumer durables, FMCG goods and automobiles should be reduced by at least 3 per cent across the board, to boost consumption and demand in the economy.
-The budget deficit could be hiked to 5 per cent for encouraging government expenditure in the infrastructure sector, especially railways and ports. This will help railway suppliers in the SME segment to increase business.
-Industrial reforms pertaining to an exit policy for labour and also industries with paid-up capital in excess of Rs 100 crore should be intensified in this budget. -To boost employment, national skilled labour data could be aggregated and allotted as per demand, across varied sectors.
Agriculture and Rural Areas
-The government must initiate pump priming in rural areas to boost rural demand.
-The concept of a national e-market should be implemented with the commodity exchanges rolling out more contracts in more agri-commodities
. -Subsidies on agri-inputs such as seeds, fertilizers and electricity should continue, to ease the pain of demonetisation.
-Direct transfer of these subsidies through Jan Dhan accounts should be expanded to meet the objectives of a cashless economy.
-Water usage for agriculture should be monitored and taxed for effective usage of this scarce resource.
-Higher MSPs should be announced especially in cotton (it can be increased by 2 per cent) and oilseeds (by another 2 per cent), which would add more money in the hands of farmers for increasing demand.
-SHGs, cooperatives, and APMCs should be allowed to float their own payment platforms through mobile apps.
-Investments in warehousing could be granted infrastructure status.
-Infrastructure investment should be boosted in railways through issuing of tax-free rail bonds.
-Accounting practices in the Railways should meet accounting standards of GASAB; now that there is a merger of the two budgets, a separate account should be maintained for major areas of operations such as infrastructure spending, passenger operations, freight operations, suburban operations and development of suburban rail systems.
-There should be promotion of rail tourism, which will help create additional employment. Bulk booking on tourist destinations could be introduced.
-There should be focus on women, health and education in rural areas. The budget for the education sector was meagre in the past two Union budgets.
-The Budget provisions will have several spin-off benefits. Granting infra status and higher fund allocation for affordable housing (Rs 23,000 crore) is a welcome step.