The Indian economy is bouncing back at an excellent pace as compared to other major economies around the world this year. The government will have to do more than providing stimulus to sustain this economic run. The recurring waves of the pandemic can make this task a challenging one for the government and the Finance Minister.
The following sections will include 14 major expectations that companies, salaried individuals, economic experts, tax experts and other taxpayers will have from the upcoming Union Budget. Let’s take a look.
- According to a recent report from Oxfam India, the richest families in India witnessed a record jump in their wealth during 2021 as 84% of households suffered a decline in income due to the pandemic. A combined study by experts of Ashoka University and CBGA seeks for the re-introduction of wealth and inheritance tax. This will help to address rising economic inequality in the country. Moreover, they also expect specific incentives for charitable organisations.
- Many economists also want a gradual fiscal consolidation, effective steps to tackle inflation and substantial capital expenditure for growth. They feel the YoY (year-over-year) fiscal deficit projection should not be considerably wide. The government should spend on infrastructure projects capital assets instead of simply increasing cash or employment schemes for the rural population.
- The section of salaried individuals is looking for a tax deduction for expenses they incur for working from home during income tax calculation. Employees have been working from home amidst the pandemic. There are families that have been considering moving into larger homes to accommodate multiple members of families working from home or for children taking online classes. Although the extra expenses may vary, there has surely been an additional investment for working from home for such an extended period.
- Experts are of the opinion that the pandemic and its resultant inflation have badly hit household budgets. So, the government should think of raising the standard deduction limit from Rs. 50,000 to around Rs. 75,000. This will provide certain relief to tax paying individuals.
- The automobile sector is looking to put EVs on priority lending. They believe this will help more customers to choose electric vehicles at a lower interest rate. In addition, they expect this budget would bring in funds necessary for research and development of batteries in public-private partnerships. SMEV (Society of Manufacturers of Electric Vehicles (SMEV) says it is looking for amendments in the PLI scheme for auto components to eliminate unfair price advantage that small and medium EV makers are facing right now.
- Insurance experts are looking to have health covers in 5% GST slab as it would help to make it affordable for all. The reduction in GST from the current slab of
- 18% to 5% may encourage individuals to opt for health insurance covers. Also, there should be a total exemption for senior citizens.
- The pandemic has greatly affected the hospitality sector leading to huge losses, slim profit margins, massive losses and losses of livelihood of several individuals associated with it. It wants to have GST input tax credit reinstated through this budget. In addition, it is looking to have measures like a furlough scheme or insurance that would safeguard restaurants from future lockdowns.
- The growth volume of FMCG has moved into negative lately. So, various FMCG companies such as HUL want this budget to prioritise putting money in peoples’ hands, particularly in rural areas. To undo the impact of inflation on rural consumption, they expect relief measures through schemes such as MNREGA and subsidised food supply.
- MSMEs and banks are looking to receive monetary support through this budget in the form of credit options similar to the Emergency Credit Line Guarantee Scheme. This support measure was introduced during the early days of the pandemic. ECLGS comes with 100% credit guarantee on loans by both banks and NBFCs. The MSME sector also wants amendments in the Insolvency and Bankruptcy Code.
- Different stock market platforms want the government to bring down STT or Securities Transaction Tax. This is because active traders tend to lose more on transaction and impact costs rather than to markets.
- Aviation industry has been one of the worst affected sectors. Pandemic-hit aviation sector is expecting the elimination of Minimum Alternate Tax and other tax breaks for a minimum of two years. It says that the aviation sector has to pay a high tax rate of 21% with no input tax credit. It wants either a complete suspension of MAT for two years or a reduction in tax rate from 18% to 5%. The rising price of ATF (Aviation Turbine Fuel), along with a drop in domestic passengers due to successive virus waves, will further impact this sector.
- Indian Private Equity and Venture Capital Association has asked the government to allow domestic firms to list on overseas stocks directly. It has also proposed an alternative definition of startups. According to it, an entity should be considered a startup until its 10th year and is not an outcome of a spin-off or merger or a subsidiary, regardless of its revenue.
- Blockchain and crypto startups of the county are looking for clarity in terms of taxation, regulations, exemptions, legislation and more. They want the government to acknowledge the importance and potential of the crypto industry and to chalk out a guideline for their operations. India has over 15 million crypto investors right now, making it the second-largest player in the crypto space. There has been a massive growth in the NFT space as well.
- The renewable sector of India is looking to receive tax incentives for different companies associated with the manufacturing of EVs and charging. They also want the government to provide incentives for technology adoption, research and development and investment in the battery and storage segment.
There are many expectations across various sectors and industries from the Union Budget of 2022, which will be tabled by Finance Minister Nirmala Sitharaman.
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Frequently Asked Questions
- When will the government table the Union Budget for 2022? The government will table the Union Budget for 2022 on 1 February. The budget presentation by the Finance Minister will range between 90 minutes to 120 minutes.
- When was STT introduced? STT was introduced in 2004 by then Finance Minister P Chidambaram while abolishing LTCG (Long-term Capital Gains) tax. The exchanges collect this tax upfront from active traders.
- What is the current LTCG tax rate? The government, through its 2018 budget, introduced LTCG tax of 10% for capital gains. Capital gains of more than Rs. 1 lakh for a financial year on listed securities such as shares and mutual funds will attract LTCG tax.
Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.