New Delhi: Wednesday brought good news for Indian taxpayers and medium-sized companies as India’s finance minister Arun Jaitley announced a tax relief for them.
Terming India as a “largely non-tax compliant society”, Jaitley said that he hoped that a tax cut would prompt the people to pay their tax dues. Out of the 37 million people who filed tax returns in 2015-16, a mere 2.4 million showed an income above 1 million rupees.
In a budget consisting of a slew of measures to boost the infrastructure and with an eye on capitalizing on the recent demonetization by the government, the Indian Finance Minister declared a reduction in the base tax rate from 10 percent to 5 percent for people with an annual income between 300,000 rupees (USD 4,476) and 500,000 rupees (USD 7,410) besides abolishing income tax for people earning less than 300,000 rupees per annum. All other categories of taxpayers will get a benefit of 15,000 rupees (USD 222) per person under the new budget.
Jaitley’s reformist budget declared a five-percent reduction in tax rates for small and medium-sized businesses with an annual turnover of up to 500 million rupees (USD 7.41 million). It also proposed to carry forward the Minimum Alternate Tax (MAT) for a period of 15 years, as against the current limit of 10 years.
In presenting the budget to the Parliament for the fiscal year starting on April 1, the 64-year-old former Minister of Defense pledged that the government would spend billions of dollars to double farmers’ incomes, upgrade ramshackle infrastructure and provide cheap housing. He went on to hail India’s economic growth despite the slowing growth rate across other emerging economies. He estimated the economic growth for the 2017-18 fiscal year between 6.75 and 7.5 percent.
The right-wing government led by BJP has introduced a whole host of reforms to boost the Indian economy ever since it assumed office in May 2014. It has continuously highlighted the importance of reforming India’s complicated tax regime. The demonetization scheme introduced under the dynamic leadership of Prime Minister Narendra Modi last year has aimed at transforming the country’s mainly cash-based economy besides rooting out rampant corruption, keeping a check on Pakistan-financed terrorism, and bringing black money back into the mainstream economy.
The budget has set the spending for the upcoming fiscal year at 21.47 trillion Indian rupees (USD 322.05 billion). Jaitley also announced an increase of 70-billion rupees from last year’s budget in the spending on highway infrastructure to 650 billion rupees (USD 9.75 billion).
The budget evoked mixed responses in India. While C. Rangarajan, the former governor of the Reserve Bank of India, expressed his happiness over the fact that the fiscal deficit was maintained at 3.2 percent as against the target of 3 percent, Rahul Gandhi, the Vice-President of BJP’s depleted rival, Congress Party, termed the budget as a disappointment as it said nothing about creating new jobs or improving the condition of farmers. Archit Gupta, the founder-cum-CEO of ClearTax.com hailed the “massive reforms in tax rules”. “This is bound to boost compliance amongst small taxpayers. We support this move for businesses which have suffered loss of business due to demonetization,” he added.