New Delhi:
As Finance Minister Nirmala Sitharaman presents her fourth Union budget on Feb. 1, all eyes would be on how the government is balancing populist measures while walking the tightrope of fiscal consolidation.
While Indian companies expect some major announcements that will enable them to rethink their growth agenda, individual taxpayers expect to have a little more disposable income on their hands to invest and consume more.
As India works towards a $5 trillion economy by 2025, and with just two days left in the 2022-23 budget, here are the top five market expectations for direct and indirect taxes.
Direct taxes:
1. 80C deduction available up to Rs 1.5 lakh per year revised upwards significantly.
2. To make the optional preferential tax regime, which came into effect in April 2021, more acceptable, raise the threshold of Rs 15 lakh income for imposing a peak tax rate of 30 percent.
3. As Web 3.0 unfolds, crypto assets encompassing a wide variety of digital assets such as non-exchangeable tokens, packaged asset tokens, etc., will gain massive traction. a specialized cryptocurrency tax regime is expected to be introduced in the budget.
4. The burden of the long-term capital gains tax (LTCG), introduced through Finance Act 2018, has somewhat eroded investor confidence. Major economies do not have an LTCG tax. Also in India, LTCG is expected to be exempt from the sale of Indian listed shares, as this would encourage investment through the exchange.
5. Businesses expect the full amount, or an appropriate portion of the expenses incurred to help society and the well-being of employees during Covid-19, to be allowed as deductible expenses. Also, the government is expected to lower tax rates for companies engaged in R&D activities to 15 percent or less and allow a weighted deduction of internal R&D expenditure.
Indirect taxes:
1. Rationalization of the customs duty structure for EV and ancillary components, renewable energy generation devices and related components is likely.
2. Sector-specific concessions are expected for semiconductor manufacturers with a focus on exports.
3. Budget allocations for the extension of the PLI scheme for sectors such as leather and laminate; additional incentives will also tempt companies to set up additional production in sectors not the focus of previous budgets and help reverse the impact of the pandemic.
4. The government is already reviewing 400 customs duty exemptions (as announced in the previous budget). The final list is expected to be proposed as part of the 2022 budget and the industry awaits it so that there is no adverse trade impact from this exercise.
5. Extension of customs duty exemption on goods imported for testing purposes and establishment of a customs dispute resolution forum, facilitation of customs compliance and integration of the current ICEGATE, DGFT and SEZ online portal into a common digital platform .
What experts say:
Nangia Andersen India chairman Rakesh Nangia said top business and upper middle class are doing well enough despite the indelible impact of the Covid crisis. “India is witnessing a real consumption problem as the less wealthy segments have still not come out of their plight. The main focus of the budget should be to enable the ecosystem around jobs, income and demand creation. There should also be several challenges including the key consideration of data protection that relatively newer sectors such as telemedicine, telemedicine and ed-tech face.”
Gokul Chaudhri, partner of Deloitte India, said the budget is expected to provide relief for lower and middle income earners with disposable incomes affected by inflation. India has also agreed to abolish the Equalization Charge (EL) and follow the multilateral solution in the form of Pillars 1 and 2 agreed between 137 Member States working on the OECD Inclusive Framework.
“The budget is expected to introduce the necessary legislative framework to facilitate its implementation and also set out a roadmap for stakeholder consultation,” added Mr Chaudhri.
Rajat Mohan, senior partner of AMRG & Associates, said that while the middle class expects higher sales revenues to counter rising inflation, large companies anticipate stability in the tax structure, MSME wants the availability of additional liquidity to fund business growth, and foreign investors expect a favorable business environment for the long term. term strategic investments from budget 2022-23.