Budget 2017 is unique in many ways.
- It’s the first time budget is being presented on first day of Feb instead of the last day
- It’s the first budget after demonetization
- It’s the last budget before GST kicks in
- It’s a budget being presented just before one-fifth of the nation is scheduled to go to the polling booth
With much publicized and fiercely debated Demonetization, implemented just 3 months back, there are high hopes that Salaried class has from this budget. One of the key points in favor of Demonetization was to unearth the Black Money, which in-turn should result in expansion of the tax payer base. With increase in tax payer base, the immediate fallout should be reduction in effective tax rate. This could be done in multiple ways like
- Tweaking the tax slabs. For eg like below
|Tax Rate||Income Slab||Example of New Slab|
|Nil||Upto ₹ 2,50,000||Upto ₹ 4,00,000|
|10%||From ₹ 2,50,001 to ₹ 5,00,000||From ₹ 4,00,001 to ₹ 8,00,000|
|20%||From ₹ 5,00,001 to ₹ 10,00,000||From ₹ 8,00,001 to ₹ 12,00,000|
|30%||Above ₹ 10,00,000||Above ₹ 12,00,000|
- Tweaking the tax rate. Like introduction of a new tax slab of say 15%
- Enhancing the limit in section 80C to say ₹ 2,50,000 from the current ₹ 1,50,000
Whatever is done, one thing is clear – reduction of effective tax outgo is one thing that is nearly unavoidable (both financially and politically) – and rightly so as it’s high time to reward the honest tax payers at the expense of those who have been evading taxes.
On the contrary, the real impact of Demonetization shall be know in FY 17-18 as this year, the impact has been for only a very short part of the whole duration. Thus the real impact on tax rate should happen in Budget of 2018 but today is going to be the pre-cursor to that. Stay tuned!!