The rising inflation cost over the last year has adversely impacted the average household budget. Therefore, there has been lot of expectations from the Finance Minister by the common man. At the same time, the fear of rising fiscal deficit over shadowed expectations of any large scale tax concessions. Nevertheless, some balancing act has been done in the current year's budget.
There has been a long-pending demand to increase the tax slab rates for individuals and reduce the overall effective tax rate. Even though the minimum threshold limit below which income is not liable to tax has been retained at Rs 1.6 lakh for individuals, Rs 1.9 lakh for women and Rs 2.4 lakh for senior citizens, there has been increase in the slab rates. In general, individuals earning income of Rs 3 lakh or more per annum are likely to benefit in terms of tax savings.
The decision to provide additional deduction for investments made in the infrastructure bonds for upto Rs 20,000 is welcome. This would also provide a large pool of funds for infrastructure development.
In respect of individuals/ SMEs carrying on business, increase in the overall threshold limit from Rs 40 lakh to Rs 60 lakh to avail of the concessional benefits under presumptive taxation would help reduce their compliance and administrative costs as they would neither be required to maintain detailed books of accounts, nor would they be required to get a mandatory tax audit done. Encouraging small companies whose total turnover / gross receipts do not exceed Rs 60 lakh in any of the 3 preceding 3 years to convert into LLP is again a welcome move.
From macro economic perspective as well, certain laudable steps have been taken. To encourage the people from unorganised sector to voluntarily save for the retirement, the government has proposed to contribute Rs 1,000 per year to each new NPS account opened in the coming financial year. This benefit would be available for persons who join NPS with a minimum contribution of Rs 1,000 and maximum contribution of Rs 12,000 per annum for the next 3 years.
Social Security is indeed a matter of concern in our country. A good start has been made in this direction by setting up a National Social Security Fund for unorganised sector workers covering weavers, rickshaw pullers, etc with an initial corpus of Rs 1,000 crore. It is expected that the scope of this scheme would be enhanced over the years to cover all individuals in the unorganised sector.