New Delhi: Finance Minister is likely to enhance the income tax exemption limits against the backdrop of an impressive rise in tax revenues and the necessity to give a boost to consumer demand which needs to be insulated from the global slowdown.
Unlike last year when income tax exemption limit marginally increased by Rs10,000, from Rs1 lakh, CEOs who were expecting a significant hike in threshold for all classes of assets included women and senior citizens, according to a survey carried out by Assocham.
* Rise in tax exemption limits may be accompanied by rejigging income tax slabs; presently, income up to Rs1,10,000 is exempted from income tax for individuals and exemption limit is Rs1,45,000 for women and Rs1,95,000 for senior citizens
* Corporate tax slab to start only from Rs5 lakh income; rework existing tax slabs
* There exists a case for reduction in corporate tax rate in wake of buoyancy in tax collections; this will not affect revenue generation, rather enhance compliance rate
* There is a slim chance of reducing peak customs duty as imports have already become cheaper on account of 10% appreciation in Rupee against dollar since last year’s budget though budget is expected to correct the inverted duty structure
* Certain manufacturing sectors (colour TVs, tyres, chemicals and textiles) face problem of inverted duty structures wherein custom duty on raw material is higher than rate applicable on import of finished products
* Higher budgetary allocations for social sectors like education, health and rural development expected
* With upward pressure on global prices of crude oil, resulting in huge losses for oil companies in India and threat of increasing inflation rate, industry leaders are expecting restructuring in tax structures imposed on import and refining of oil; also FM may reduce customs duty on import of crude oil and products from present 5% to 2.5%; there are chances of rationalization in excise duty on petrol and diesel
* Budget proposal for fiscal ‘09 may give boost to consumer durables sector whose production declined by 1.3% in Apr-Dec ‘07 as compared to healthy 11.2% growth last year; reduction in excise duty from 16% to 12% expected
* There may be a slashing of excise duty on two and three wheeler segment in auto sector which has taken severe hit due to high interest rates; sector has been posing negative growth of around 7% during Apr-Dec ‘07; present rate of excise rate on consumer goods is around 16%
* Textile industry is likely to get adequate incentives as the sector is hit due to increased competition in export market due to currency appreciation resulting in closing of numerous textile units and high level of unemployment
* Sops for industry could be on the anvil (reducting basic excise duty on textile machinery and equipment from 16% to 8% and extension in exemptions); these were enjoyed exclusively by export oriented Units (EOUs); budget allocation under technology Upgradation Fund Scheme (TUFS) and Scheme for Integrated Textile Park Scheme (SITP) may rise