As we all know the finance ministry is busy planning for the union budget for FY 2020 to be presented on 1st February 2020.
With a few things ranging from low industrial output, slowing demand, and the overall GDP growth pegged at a low, a demand revival is the key to steer the economy back into progress. In context of the same, here are some expectations from the budget 2020.
- Enhance the cash flows of the middle-class taxpayer: Income tax rate relaxation is expected in the upcoming budget 2020. The present rates have 5% rate for income slab of Rs 2.5 to 5 lakh, 20% for Rs 5 to 10 lakh income slab and 30% for income slab from Rs 10 lakh and above. A cut in the tax rate from 20% to 10% can help increase the disposable surplus with the middle-class, who are also the growth drivers of the economy.
- Savings boost for individuals: Section 80C investment options include investments in LIC, mutual fund ELSS, government securities, and housing loan repayment, all under the overall limit of Rs 1.5 lakh, for tax saving. Housing loan repayments and education loans is a significant financial commitment for an individual and leaves less room for savings. If the government enhances the limit under section 80C, it’ll give a boost for public savings.
- Sector-specific incentives: Sectors such as power discoms, infrastructure, non-banking financial companies (NBFCs) and real estate, have been suffering lack of demand and finances. The government, however has outlined a plan for infrastructure and real-estate, the mechanics are still to be worked out by it. So, the government could also be aiding the infrastructure plan by issuing the long term tax-deductible infrastructure bonds.
- New GST returns: The Finance Minister may tweak the GST laws to prepare taxpayers for the new GST return filing system effective from April 1, 2020. The rules may be amended to accommodate the new returns in RET-1 or RET-2 or RET-3 form along with annexures in ANX-1 and ANX-2.
- GST Rate Cuts: Over the last two years, GST rate cuts have led to the dwindling revenue collections. One hand it has favored some economists on the other hand the auto sector is keenly looking forward to a cut in automobiles from the existing 28% to 18%. Additionally, the health care segment is expecting to have the services related to health care zero-rated product under GST.
- LTCG tax reduction: 10% of tax is currently levied on LTCG. As per the tax advisors, government is willing to consider the options to attract foreign long-term investments out of which one is to get rid of the long-term capital gains tax on the listed equities. Seemingly, government is also considering to differentiate between a short-term investor and a strategic investor.
While the government is of course running on a tight fiscal situation with lesser than expected tax collections, an increase in the disposable surplus in the hands of individuals will help revive consumer demand for sure.