Tax benefits unlikely for individuals in Budget

Faced with a challenging financial scenario in 2016-17, the Union Government is unlikely to dole out any income tax benefits to individual payers. It, however, may consider levying additional measures for revenue mobilisation.

“The fiscal space will be severely restricted in 2016-17 due to additional expenditure commitments. Further, there will also be boost to many individual taxpayers through the Seventh Pay Commission so additional incentives may not be required in the Union Budget,” said two officials familiar with the development.

The move would be a break from the last two Budgets when Finance Minister Arun Jaitley provided significant sops to personal income taxpayers.

While the Minister raised the deduction limit for health insurance in this Budget, he had hiked the personal income tax exemption limit by ₹50,000 in the 2014-15 Budget.

The thinking comes as the Finance Ministry tries to balance the additional spending of nearly ₹1,40,000 crore on the implementation of the Seventh Pay Commission report and the One Rank One Pension scheme in 2016-17 while maintaining its fiscal deficit targets and boosting public investments in infrastructure.

Tax experts too said that the chances of a tweak in the personal income tax slabs are low in the forthcoming Union Budget.

“There are expectations of relief from the common man on personal taxes. The government could consider options such as making the tax regime for National Pension System to exempt exempt exempt status (E-E-E). Alternatively, it could also provide relief by hiking the allowance for conveyance, medical expenses or children’s education that have not been revised for long,” said Divya Baweja, Partner, Deloitte Haskins & Sells.

Additionally, the Finance Ministry is also considering imposing further checks on black money that would also help raise tax revenue.

One of the proposals on the discussion board is to review the sources for Annual Information Returns that captures data on high value transactions by taxpayers.

The Finance Ministry is understood to be also considering widening the scope of tax deducted at source for more transactions.

“These are part of initial discussions. The focus will be to widen the tax collection base while ensuring that the tax administration remains friendly and does not harass individual taxpayers,” one of the officials stressed.

Sources said the Finance Ministry is also hoping for a healthy rise in income tax collections next fiscal on the back of higher salaries and pensions to a sizeable part of the taxpayer base. Initial estimates reveal that tax authorities may project about a 20 per cent rise in personal income tax collections next fiscal.

For 2015-16, gross taxes on income is estimated at ₹3,27,367 crore – a 15.1 per cent rise from the Budget Estimate of ₹2,84,266 crore last fiscal. However, the target was scaled down in the Revised Estimate for 2014-15 to ₹2,78,599 crore.

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