The Third Modi government or NDA government, which was sworn for a historic third consecutive term, will be presenting its first budget in the 18th Lok Sabha. The Union Finance Minister, Nirmala Sitharaman, will be presenting his record 7th straight budget in the new parliament building. This would also mark the first full-budget in the new parliament meeting.
The interim budget before the Lok Sabha elections was presented on February 1.
When it comes to the Union budget, it is a vast paradigm that usually encompasses a variety of facets that influence people from every walk of life. But there are some elements that stand out, given their utmost importance and magnitude.
Here are some of the key focal points that are in the minds of many as they look forward to the budget.
Income Tax Slabs
Demands for respite for tax payers in the form of a reduction or change in slabs have been growing in many circles, with even industry leaders economic observers and analysts asking for consideration of a change in the personal tax regime. When the interim budget was presented earlier this year, there were talks of a possible tweak in tax, that did not come to pass.
The new tax regime starts with 5 per cent for those with an income of Rs 3,00,000 and above. The highest personal tax slab, according to the new regime, is 30 per cent for income above Rs 15,00,000.
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The new tax regime, which although optional, is also the default tax regime. | Cleartax
Goods and Services Tax
GST, according to some, has been a revolutionary system that has brought about parity and understandability to the taxation system. For the system's detractors, it has not exactly been a boon. Some stakeholders have asked the government and therefore expect the budget to bring the system closer to home and be more accommodating of the larger system, including SMEs and MSMEs. In addition, the GST regime has led to a tussle between the state and the centre over resources. These issues would have to be solved for the better functioning of the federal system.
The current GST regime has 5 slabs. The rates are as follows; 0 per cent, 5 per cent, 12 per cent, 18 per cent, and 28 per cent.
Tax Rationalisation
Another facet that once again is connected to tax is the demand for tax rationalisation. Rationalisation is a process that usually involves structural and strategic changes. These changes are brought in to simplify tax systems, make them more efficient, and improve compliance.
Many sectoral leaders, like in real estate, have asked for rationalisation for better compliance and for better growth of the system and individuals would have more room to spend their resources and invest in different avenues, including properties and equities.
Corporate Tax
Another avenue of the budget that is connected to the taxation system in the country is the issue of Corporate Tax. Since the 1991 budget, when the corporate tax was at 45 per cent, the tax has only seen a decline. It was in the 2019 budget that the corporate tax was reduced by 10-percentage-point drop. The current tax rate for domestic companies stands at 25 per cent, those who opt Section 115BA. 22 per cent for Section 115BAA. 15 per cent for section 115BAB.
Railways
Another focal point would be the Ministry of Railways. Although the Defence Ministry is the one that historically receives the highest allocation in Union budgets. The Railway Ministry budget last fiscal year saw the highest jump in its overall allocation, with a 49 per cent rise in its allocation. The total allocation stood at Rs 2,41,268 crore. the recent spree of unfortunate accidents has only laid greater emphasis on the safety and efficiency of railways. This, in turn, could result in greater emphasis on the ministry. In addition, the questions regarding whether there will be return of the railway budget will also be answered.
Defense
The Defence Ministry has had the highest allocation among all the ministries in the cabinet. It received a total allocation of Rs 5,93,538 in the previous budget. Given the ever-changing geopolitical circumstances and India's tense relationship with its neighbours and at its borders, emphasis on the defence budget would be high.
Energy Transition
Given the immediate nature of the climate crisis that is affecting everyone on the planet, the need for a speedy transition into greener and cleaner energy has been a part of all major discourses. India, a developing nation, continues to rely heavily on non-renewable sources. India draws 70 per cent of its energy requirements from carbon-based sources. Therefore, the government and its decision to invest more in Green energy would be in focus.
Government Divestment
Divestment has been one of the key areas of emphasis for the Modi government. In previous budgets, the government has placed additional emphasis on the avenue of divesting from its publicly owned companies. The government had a divestment target of Rs 51,000 crore in the previous budget, which was 21 per cent lower than the budget before that. Whether there would be a greater focus on Divestment or whether the government would look away from it, is something that remains to be seen, as it not only affects the companies in hand, but also the sectors, that they are connected. One of the biggest name in this regard is LIC. LIC is yet to comply with the SEBI norms for listed companies.
