This time Budget will be announced one-month in advance, instead of the traditional practice of declaring it on last day of February. The whole idea of advancing Budget is to complete the spending plans and tax proposals before beginning of the new financial year.
Post-demonetisation, Budget is likely to be taxpayer-friendly. The upcoming budget will slash down the income-tax and corporate tax rates to boost consumption and investment that has been severely hit due to demonetisation.
You may also expect a hike in tax-slabs from R2.5 lakh to R4 lakh for individuals, HUFs, etc., and from R3 lakh to R5 lakh for senior citizens.
The finance minister in his Budget Speech, 2015 has indicated that the rate of corporate tax will be reduced from 30% to 25% over the next four years. Beginning was made in the last Budget wherein the rate of corporate tax has been reduced to 29% for companies having turnover up to R5 crore. Thus, the upcoming Budget is likely to reduce the corporate tax from 30% to 28%. Lower taxes may encourage people to show their real income and discourage generation of black money.
FM may provide tax sops to boost demand in housing sector. Under the existing regime, Section 80C provides for overall deduction of R1.5 lakh for all payments, like principal amount of housing loan, insurance premium, contribution to PF, etc. This upcoming Budget is likely to provide additional deduction for payment of principal amount of housing loan. In the last budget, the government had allowed additional deduction of interest of R50,000 under Section 80EE for new housing loan sanctioned during April 1, 2016 to March 31, 2017. This time-limit is likely to be increased by another one-year.
Equalisation Levy, popularly known as ‘Google tax’ was introduced to tax digital advertisement services of non-residents. Currently it covers online advertisements and provision of digital advertising space or facilities. This levy is likely to be expanded to tax other transactions like downloading of songs, movies, books, software and online sale of goods or services.
Start-ups are likely to get tax benefits in the upcoming Union Budget, 2017. Currently, start-ups enjoy tax holiday period of three years. That tax holiday period may be increased from three to seven years to help them meet the cash-crunch in the initial phase.
Recently, the government had announced that rate of presumptive income under Section 44AD will be decreased from 8% to 6% for payment received via digital means for FY 2016-17. It is likely that rate of presumptive income will also be decreased for professionals on similar lines under Section 44ADA.
Post-demonetisation, there might be genuine spurt in turnover of small dealers merely due to acceptance of payments via digital means. They shall have to get their accounts audited if their turnover exceeds R1 crore in FY17. Thus, the government may also increase the turnover limit of tax audit for FY17 from R1 crore to R1.5 crore.
Under the existing regime the tax treatment of NPS (National Pension System) is not on a par with the tax treatment of EPF (Employee Provident Fund) and PPF (Public Provident Fund). Under the existing regime, EPF and PPF have EEE (exempt-exempt-exempt) status. However, the NPS has EET (Exempt-Exempt-Tax) status, i.e, tax will be levied only at the time of withdrawal. This Budget may provide status of EEE to NPS at par with the status of EPF and PPF.