The Union Budget, which is to be presented on Wednesday, is expected to increase exemptions on the personal income tax leaving more money in the hands of the people to counter the effects of demonetisation.
Finance minister Arun Jaitley could also announce tax incentives for buying new houses to give a boost to the realty sector. “Individual tax payers are expecting a big rise in the exemption limit and not a token amount of Rs 10,000-20,000,” Assocham said on Sunday.
It also said Mr Jaitley is faced with excessive hopes on ‘solve-all’ Budget. “Meeting excessive expectations riding on the forthcoming Union Budget, being seen as a ‘solve-all’ big mover in the aftermath of demonetisation, could be a challenging task for Mr Jaitley,” pointed out Assocham.
However, Mr Jaitley may also chose to hike service tax by 1 per cent till July when GST, which will subsume indirect taxes, is targeted to be rolled out.
The move will provide Mr Jaitley window of three months to raise additional revenue before GST comes in, but will push up the prices of most of the services including mobile calls, train and airfares, eating out at restaurants, insurance premiums, cost of under-construction flats and DTH bill among many others.
Meanwhile stock markets are also nervously waiting for the Budget to see whether the government will introduce long term capital gains tax on shares despite the finance minister’s assurance on the matter.
Market participants have been jittery ever since Modi said that contribution of tax from those who make money on the markets has been low and “we should consider methods for increasing it.”