India is the fastest recovering country among major economies this year. Finance Minister Nirmala Sitharaman will need incentives to maintain the pace of recovery. In the next month, the elections of 5 states and the new variant of Kovid Omicron is posing a challenge to them.
These are the 11 expectations from Sitharaman’s February budget for economists, companies, tax experts and the salaried class of India.
1. Inflation curbed
Economists expect investment to gradually boost growth and take steps to rein in inflation. He believes that the year-on-year estimate of the fiscal deficit should not be too large. They want the finance minister to spend on capital assets and infrastructure projects instead of increasing allocation for rural-focused cash or employment schemes.
A report by Oxfam India states that India’s richest families saw their wealth reach a record high in 2021, while 84% of Indian households’ incomes fell.
2. Standard deduction to be increased
The standard deduction amount is very less in view of inflation. People’s household budget has been badly affected. To provide some relief to the salaried people, there is a need to increase the standard deduction limit from the present Rs 50,000 to at least Rs 75,000.
3. Salary class get relief
The salary category is expected to get further relaxation in standard deduction in the budget of 2022. Since the system of work from home is proving to be costly, now the employees need some relief. With many members in the family working from home and the need to accommodate online classes for children, those working from home need to shift to larger homes.
4. Lower Tax on Health Covers
Insurance experts want health covers to be kept in the 5% GST slab to provide good healthcare. At the same time, it can also be made more economical. If the GST on insurance products is reduced from the current 18% to 5%, then it will encourage more people to buy health insurance. There should be an exemption in GST for insurance of senior citizens.
5. Have low interest rates on vehicles
The automobile sector wants more and more citizens to be encouraged to opt for EVs by preferring electric vehicles (EVs) at lower interest rates. It also wants adequate funds to be allocated for Research and Development (R&D) in Public Private Partnership mode for the development of the battery.
6. Input tax credit restored
The hospitality sector wants the GST Input Tax Credit to be restored as it is going through a period of low margins, huge losses and livelihood of thousands of people. It also wants a system to protect hotels from further lockdowns. Insurance or furlough scheme as offered in the UK. In December 2021, the British Treasury announced grants of more than Rs 10,000 crore and other relief funds for the hospitality business, as pubs, bars and restaurants were closed due to Omicron.
7. Get more money in the hands of the people
Big FMCG companies like Hindustan Unilever want Sitharaman to be in no hurry to reduce the fiscal deficit but continue to put money in the hands of the people. Especially in rural areas where FMCG growth has turned negative. Commodity prices have affected rural consumption.
All the relief provided by the government in the last few years to rural customers through schemes like MGNREGA and free food supply should be expanded in the next financial year as the economy is still in recovery mode. ji
8. Stock Market Also Wants Tax Reduction
Stock market platforms want the Security Transaction Tax (STT) to be lower in the budget as active traders lose more money in transaction costs and impact costs than the market. STT was introduced by the then Finance Minister P. Chidambaram in 2004. Long Term Capital Gains Tax (LTCG) of 10% was introduced in Budget 2018 for gains above Rs 1 lakh, but STT was not reduced.
9. Airlines companies also want concession
Airlines affected by the pandemic want to suspend tax breaks and Minimum Alternate Tax (MAT) for at least two years. The airline industry says they are taxed up to 21%, but there is no provision for input tax credit for them, as is the case for other sectors. Eliminate Minimum Alternate Tax (MAT) for aviation and airport sector for at least two years. They wish to reduce the mat from at least 18% to 5% if the mat is not removed.
Rising fuel prices are putting further pressure on the sector, as fuel contributes up to 45% of the operating cost of airlines in India.
10. Digital Token Seeks Clarity
Domestic crypto and blockchain startups want more clarity from Sitharaman on issues such as taxation, laws, exemptions and regulation. They want Sitharaman to acknowledge the industry’s potential and show a more nuanced approach to help them operate and grow in the future. With more than 15 million crypto investors, more investors are coming into this sector in India.
11. Startups Need Concession
Industry body Indian Private Equity and Venture Capital Association has proposed a new definition for startups. It has also reiterated some old demands like allowing local firms to directly list abroad. The startup body has proposed that a company should be considered a startup unless it is less than 10 years of age. Also, it should not be a subsidiary company or a merger company, irrespective of its earnings.