Individuals may get some relief in tax rates in line with the corporate tax cuts announced in September 2019. Consistent with the recommendations in the draft direct tax code, introductions of tax slabs of Rs 2.5-10 lakh – 10% (with a full rebate up to Rs 5 lakh), Rs 10-20 lakh - 20%, Rs 20 lakh-2 crores - 30%, Rs 2 crores plus - 35% are expected.
Deduction under section 80C provides for various types of payments such as PPF, fixed deposits, housing loan repayment (principal portion), insurance, tuition fees, etc are expected to be enhanced as well. The limit of deduction under section 80C of the Act was last increased from Rs 1 lakh to Rs 1.50 lakh in the Budget of 2014. As such, it is expected that the exemption limit would be enhanced to Rs 2 lakh.
Higher HRA exemption is allowed in case of employees living in the four metros -- Mumbai, Delhi, Kolkata, and Chennai. It is expected that cities like Pune, Bengaluru, Noida, Gurgaon etc. may be covered within the category of metro cities.
Export growth shows a declining trend on account of global trade-wars, competition, Brexit, etc. The recent adverse finding of WTO Dispute Resolution Body on India’s export promotion schemes (MEIS, EPCG, EOU, DFIA, SEZ, etc.) has sent shock-waves among exporters. On the indirect tax front, it is expected that the Government would announce the roadmap on alternate schemes to allay concerns of the export community, while a detailed scheme would later be announced through Foreign Trade Policy. It is expected that Basic Customs Duty (BCD) on vital raw materials for steel, pharma API, EV components, cement, etc. would be reduced to make an even playing field.
Higher customs duty rate on basic raw material poses a challenge to domestic manufactures. It is expected that the government would continue its drive of rationalisation of customs duty rates.
(The writer Partner/ Tax & Regulatory Services at BDO India. With contribution from Dinesh Kumar, Associate Partner/ Indirect Tax, BDO)