New Delhi: Tax payers may get more sops in the Union Budget for investment in housing and infrastructure schemes and finance minister Pranab Mukherjee may tomorrow make popular proposals to hearten the investors and industry.
Not only the budget proposals may contain measures for subsidised wheat and rice at Rs3 a kg for the poor, in accordance with the Congress’ poll promise, Mukherjee could also announce a roadmap for disinvestment to mop up a substantial sum from sale of government equity in public sector undertakings.
Sources in the Finance Ministry feel that there may not be any tinkering with tax rates, but the salaried-class could get additional income tax exemption benefits.
However, the finance minister may seek to shore up revenue through expansion of service tax net, besides withdrawal of some import duty exemptions as inflation is now in negative terrain.
Some of the duty sops offered to the industry as part of three stimulus packages last fiscal could also come in for review, with Planning Commission member Saumitra Chaudhuri saying these were emergency steps and should be withdrawn.
“The word populist has negative overtones. I am sure finance minister will present a popular budget”, Planning Commission deputy chairman Montek Singh Ahluwalia had said on his expectations about the forthcoming budget.
The restoration of economic growth, impacted by the global financial crisis, being a top priority, Mukherjee is expected to announce a series of measures that could buoy housing and infrastructure sector. A boost in these two will create demand in many other sectors like steel, cement etc.
Some of the measures could be additional tax benefits for investment in infrastructure funds as also raising the ceiling on housing loan interest payment for income tax exemption, sources said.
As much as Rs1.50 lakh a year paid on interest on housing loan is exempted from income tax at present. The housing industry is demanding that this ceiling should be raised to Rs3 lakh a year.
One of the major challenges before Mukherjee would be to balance the growth requirement to the budgetary deficit that would need a market borrowing of over Rs3 lakh crore during the current financial year.
Fiscal deficit was projected to be 5.5% of GDP in the interim budget, but that was when the Finance Minister did not announce the third stimulus package. The package was announced in reply to the debate on interim budget, which itself would take fiscal deficit to six per cent, sources said.
As such, the Economic Survey has also recommended elimination of all cesses, surcharges and transaction taxes, including the fringe benefit tax and securities transaction tax along with introduction of New Income Tax Code that would simplify the tax laws.
In this context, the budget may not increase cess on petrol and diesel from the current level of Rs2 a litre, which is demanded to fund the national highways, rural development and laying of state roads.
On other hand, the gross budgetary support for the planned investment, a issue jointly decided by the Finance Ministry and the Planning Commission, could be in the range of Rs335,000 crore, an amount almost equivalent to expected market borrowing.
The interim budget had proposed Rs 2.85 lakh crore, for planned investment.
Faced with intense pressure form corporate to announce another stimulus package and to cut tax rates, Mukherjee is likely to come up with fiscal sops for the segments of the industry hit hard by the gobal crisis.
“Indeed we may have to consider additional Plan expenditure of anything from 0.5 to 1% of GDP,” he had said in interim budget.
The budget may give various tax exemptions to infrastructure bonds to channelise savings for the long term projects.