Union Budget 2017 is certainly unique and historic in many ways. Besides being presented one month earlier, the first date of February, the budget is peculiar in that Railway Budget will be incorporated in the General Budget. The Union budget comes at the backdrop of two critical economic decisions by the government; demonetization move and Goods and Services Tax. The budget will, however, decisively determine the government’s way of dealing with the present situation of expectations in the country.
Major expectations from the 2017 budget
- Income Tax Slabs
Expect Arun Jaitley to announce some upward revisions of income tax slabs to benefit ordinary taxpayers. From the present income tax limit of Rs. 2.5 lakh, the government is expected to raise the limit to Rs. 4 lakh. Late December last year, the Finance Minister, Shri Arun Jaitley, announced that the emphasis should be on reduced tax rates. The argument is lower tax rates bring in more revenues since they have a wider tax base. According to Shri, India’s traditional mentality that high tax rates produce greater tax revenues should be changed. Decreasing tax rates give the country’s goods and services a competitive edge in the international market enabling its citizens to generate more income abroad.
- More incentives for cashless payments
Since union budget 2017 is the first after demonetization, expect it to promote digital payments. While discount on card transactions and card toll booth fees, waiver of mercantile discounts charges when buyers use debit cards and the likes have been implemented, the government is expected to introduce additional benefits to entice people to go cashless through debit cards, credit cards, and mobile wallets. You can also expect the announcement of advantages for using payment bank services targeting the under-banked and unbanked sections of the society.
- Increased investment in Infrastructure
Following the merger of the Union Budget 2017 and Railway Budget, the Finance Minister has every reason to introduce populist strategies focusing on increased development of infrastructure. Modernization of the railway system is long overdue. Additionally, expect recent Kanpur accident to give impetus to increased government expenditure on rail modernization. As has been the tradition, expect the government to launch some more new trains, coupled with a downward revision of non-A/C class fares. Reduced fares will be a deliberate move to boost positive sentiment from voters occupying the lower economic sectors who bear the largest brunt of the demonstration announcement.
- Expect Union Budget 2017 to introduce new rules on how to tax capital gains accruing from stock investments. Currently, gains from stocks that citizens have held for one year does not attract tax. The minimum holding period is expected to be increased to up to 3 years. Tax-free limits, currently having no limit, will expectedly be capped at a higher amount. Stocks sold within one year now attract a 15 percent tax, but there is a likelihood the Minister will increase the tax rates to 20 percent.
All in all, expect Union Budget 2017 to be relatively different from all the previous ones, although you shouldn’t expect sweeping changes to occur. The inspiration behind all the above expectations and a lot more is the government’s endeavor to create a positive feeling about the future. A positive impression is crucial in boosting investor confidence, both internationally and domestically.