Budget 2017: Expectations of taxpayers & experts

Dalal Street Investment Journal (DSIJ) in an interaction with Kaustubh Belapurkar, the Director of Fund Research of Morningstar Investment Adviser India, sought his views on expectations from Budget 2017 on taxation and how making retirement savings can be tax-beneficial for investors. 

Kaustubh Belapurkar talked about the options currently available, such as National Pension Scheme (NPS) that offers an equity exposure. He said what holds NPS back is being taxed as quasi exempt-exempt-tax (EET), which puts it at a disadvantage against other 'retirement products' such as employees' provident fund (EPF) and public provident fund (PPF). "

"In markets like the US, the retirement savings plans, 401(k) have been the entry point for many mutual fund investors. 401(k) is a retirement savings plan sponsored by an employer, which allows workers to save and invest a piece of their paycheck before taxes are taken out. After having seen the benefits of these investments, they are now investing a substantial portion of their household savings in other mutual funds along with their 401(k) contributions. A similar practice in India will guide investors towards such investment avenues, which should help investors move away from traditional physical assets such as real estate and gold and invest greater sums into financial assets, which will help them effectively build a good retirement corpus," he added. 

Girish Vanvari, the partner and head of tax at KPMG, pointed out that the government needs to focus on lowering corporate taxes to boost job creation. 

On the other hand, in a pre-budget survey by taxation consulting firm Ernst & Young (E&Y), around 81.42 per cent of the respondents felt the corporate tax rate would be reduced to 25 per cent, from the present 30 per cent, excluding surcharge and cess. On whether the government would reduce personal tax rates or revise the threshold limit to put more disposable income in the hands of the common man to increase consumption and demand, the survey found that almost 60 per cent of the respondents want personal income tax rates to be enhanced to Rs 5 lakh.

Besides, 33.33 per cent of the respondents felt that the general anti-avoidance rule (GAAR) would be deferred by a year. It seems the government is working towards a host of direct tax incentives, to be announced in the upcoming Union Budget, buoyed by increased tax collections due to demonetisation. This could mean lower personal income and corporate tax rates, and if this happens, it would bring cheer to both the salaried class as well as the corporate sector.