Budget 2017: First Take

Tax collections stoke confidence

To me, the Finance Minister’s Budget proposals convey: spend more in rural India, allocate more to socially-beneficial and infrastructure projects, attempt to prop up growth, reward tax payers with some tax benefits, and improve ‘ease of doing business’ – yet, defer to fiscal prudence.

Despite delivering on popular expectations post the pains caused by the recent demonetisation and in light of five poll-bound States, the Finance Minister has also adhered to fiscal discipline. The highest-ever growth in advance tax collections in the year to date appears to be stoking his confidence on this count.

Given the impending implementation of the GST, the Finance Minister has left indirect taxes largely unchanged. He has only marginally tinkered with direct taxes – (a) cutting the tax rate on the ₹2.5lakh - ₹5lakh individual income slab from 10% to 5%, and imposing a 10% surcharge on incomes between ₹50 lakh and ₹1 crore, and (b) cutting the tax rate on MSMEs by 5% to 25% – as a net result of which he anticipates a marginal shortfall.

The Finance Minister spoke of benefits to the poor and the underprivileged sections of society, and of higher rural spending.

Accordingly, his allocation under MNREGA is at an all-time high. His goal of doubling farmer income in five years is laudable, as are his schemes to alleviate rural poverty in general, impart professional skills to the youth, encourage small entrepreneurs, and make investments in education and healthcare.

The focus on infrastructure has continued, more so with the unification of the Rail Budget with the General Budget. To my mind as well, this could mean greater synergies between alternate modes of transport including roadways, railways, waterways and airways.

Not only has the Budget provided for improving passenger safety on the Railways, he has also hinted at improving financial accountability. Encouraging digital transactions, a theme throughout the Budget presentation, is evident in the doing away of service charges on online ticket booking.

The real estate sector has been the hardest hit during the last 2-3 years of slowdown and the recent demonetisation has only compounded the challenges. Besides the interest rate subventions that the government had announced recently for borrowers seeking to fund purchases of low cost homes, the Budget gives infrastructure status to the low cost housing sector and some respite to developers on the taxation of unsold inventory. These measures should somewhat assuage the players. Perhaps the biggest strides in the Budget are towards a less-cash economy. For domestic and foreign investors, the Finance Minister has stressed on ease of doing business.

Much to the liking of financial markets, he has not hinted at the return of an “inspector raj,” choosing instead the moral persuasion route to raise tax revenue. Historically, equity has been the best class from long-term perspective and I believe that history will keep on repeating for the long-term investors. Remain invested. For investors there are ACHHE DIN.

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Printable version | Jun 23, 2021 4:36:29 AM | https://www.thehindu.com/business/budget/Tax-collections-stoke-confidence/article17131303.ece

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