Ahead of the fourth Union budget that would be presented by Finance Minister Arun Jaitley on February 1, there are expectations that the government will give relief to the Indian middle class by increasing the limits of taxable income. Such a move is expected to give a boost to the consumption sectors which are reeling under the negative effect of the demonetisation. The demonetisation announced in November last year led to reduction in consumption as the policy measure sucked out 86 per cent on the currency from the economy.
"Indian economy is facing tough times today. The demonetisation has changed the entire gamut of the economy," said SBI Research in a recent report.
The research wing of country's largest bank, SBI, expects "an increase in personal income tax exemption limit from Rs 2.5 lakh to Rs 3.0 lakh". The agency has also recommended an increase in section 80C exemption limit from current Rs 1.5 lakh to Rs 2 lakh".
The last time government increased the limits of taxable income was in 2014-15 budget when finance minister Arun Jaitley had increased the limit from Rs 2 lakhs to Rs 2.5 lakhs.
After demonetisation most consumption based companies have reported decline in sales, suggesting lower spending power of consumers. Due to this, International Monetary Fund has reduced India's GDP growth forecast to 6.6 per cent in 2016-17.
According to the report, such giveaways will cost Rs. 35,300 crore to the government. The tax exemptions could be " more than balanced by (revenue generated from) Income Disclosure Scheme-2 and cancelled note liabilities of RBI", it added.
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