In Budget 2017, Finance minister Arun Jaitley faces an uphill task of balancing expectations of tax cuts as well as generate revenues for capital spending to support the economy. The research wing of India's largest bank, State Bank of India (SBI), in a report has recommended that the government should raise the income tax exemption limit to Rs 3 lakh from Rs 2.5 lakh. According to the report by SBI, the fourth Budget of Arun Jaitley is likely to make a sweeping recast of direct taxes to give a boost to the economy following demonetisation.
"We expect an increase in personal income tax exemption limit from Rs 2.5 lakh to Rs 3.0 lakh, increase in section 80C exemption limit from current Rs 1.5 lakh to Rs 2 lakh, interest exemption on housing loan from Rs 2 lakh to Rs 3 lakh and at least reducing (if not abolishing) the lock-in period for bank fixed deposits from 5 years to 3 years for availing tax exemption," said the report.
Such giveaways will cost Rs 35,300 crore to the government, the report said.
The report, prepared by SBI's chief economic advisor Soumya Kanti Ghosh said the tax exemptions could be " more than balanced by (revenue generated from) Income Disclosure Scheme-2 and cancelled note liabilities of RBI".
According to SBI research, tax collections under the income disclosure scheme could be around Rs 50,000 crore and cancelled liabilities from RBI to be around Rs. 75,000 crore.
"Government(s) have periodically increased the income tax slabs from Rs 22,000 in 1900-91 to Rs 2.5 lakh in 2014-15. Due to 7th Pay Commission, the personal disposable income has been increased, so we believe there is a need to raise the exemption limit to Rs 3 lakh. Due to such increase in limit, 75 lakh tax payers will be exempted from income tax," the report said.
The SBI chief economist expects Mr Jaitley to go for a fiscal deficit of Rs 5.75 lakh crore or 3.4 per cent of GDP for FY18.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
