Union Budget for the fiscal 2016 -17 is presenting today in parliament. Finance Minister Arun Jaitley faces a tough task of balancing the needs of farm sector as well as the industry when he presents his Budget. Rising rural distress because of droughts have put considerable pressure on the Finance Minister to spend more on social schemes rather than industry.
The Government is expected to unveil a road map for disinvestment, announce increases slightly more generous than the recommendations of the Seventh Central Pay Commission, the lowering of the corporate tax from 30 per cent to 29 per cent, the first cut in the series planned to bring it down over the next four years to 25 per cent.
Although the Narendra Modi government has exceeded its target in indirect tax revenues significantly in the current financial year, the direct tax collection is not up to the mark yet. The main expectations about tax exemptions in the budget are increase in tax exemption limit from Rs 2,50,000 to Rs 3,00,000, increase in limit of 3 years for construction period for availing interest deduction on housing loan and increase in tax exemption limits on interest on savings bank from Rs 10,000 to Rs 20,000.
Union Budget 2016 – Highlights
The biggest challenge before the finance minister is to strike a balance between fiscal consolidation and economic revival. The government last year fixed its fiscal deficit target at 3.9 per cent of GDP. With the advantages like fall in oil price and inflation control, fiscal deficit falls within the target. The budget may increase spending towards rural infrastructure and mega irrigation projects to provide relief to the rural sector. Mr Jaitley to hike service tax to around 16 per cent. The crash in global crude oil prices will help keep subsidy payments lower this year. Corporates expect Mr Jaitley to reduce the corporate tax rate in line with his commitment to reduce tax rate by 5 percentage points over four years.