Budget 2022 expectations: Govt must bring out sops as India grapples with COVID wave, punctured grow

Budget 2022 expectations: Govt must bring out sops as India grapples with COVID wave, punctured grow

After a temporary breather from the pandemic, the country seems to be heading towards the third wave of the COVID-19 pandemic. Attributed to the recent wave, the Indian economy witnessed declining investor confidence and market investments, an uncertain future of businesses, a nose-dive in share markets and much more. 

While India has slowly been recovering from the pandemic, the role of Government policies plays a vital role in determining the strength and pace of such recovery. The RBI and the Government have prioritised supporting nascent growth recovery. The corporate tax rate for new manufacturing companies was reduced to 15% last year. Recently the Government unveiled a $27 billion PLI scheme for 13 sectors to help integrate Indian companies into the global value chain and tap into the opportunities therein. The Government’s efforts in plugging tax leakages using technology have also started to pay dividends; tax collections in the first seven months of FY 2021-22 have increased by 30% against the same period in 2019. 

However, there are also several other challenges; unemployment, revival of the travel & tourism sector and the need to provide more support to MSMEs to name a few critical ones. India needs the economy to grow at a sustained rate of 8-9% over a decade, and more to catapult us to a middle-income country.

Now with the Budget scheduled to be announced next week, economist Raghuram Rajan rightly commented that the “Key issue before Budget is to maintain market confidence”. 

The Budget can help nurture business resilience. To boost market confidence, it is inevitable that the Government would need to introduce some sops in Budget 2022. The investor community is expecting the allowance of direct overseas listing for Indian start-ups and easing the ESOP (employee stock ownership plan) taxation regime to facilitate further wealth creation through the digital economy. The salaried class is expecting allowances in claiming deduction of ‘work from home expenses’ incurred on account of the pandemic and extension of the LTA cash voucher scheme to FY 2021-22 as well. Tax slabs for individuals have not been changed in the recent past. One may expect a change in tax slabs which will enhance the available disposable income. The Government could also allow the benefit of medical insurance deductions even for individual taxpayers opting for the concessional tax regime. For corporates, they hope Budget 2022 would grant relief by introducing tax deduction on CSR spends. It could be expected that the removal of disparity of tax rates between companies and partnership firms/ LLPs could help in the reduction of the tax burden on SMEs/ MSMEs. Tax-friendly administrative steps like providing auto acceptance of rectification applications if not dealt with within a prescribed timeframe, introducing a mechanism to allow appropriate tax credits in case of business restructuring, more robust guidelines to tax officers in case of faceless proceedings, automatic issuance of tax residency certificates to India Inc. etc. are some of the sops that if introduced in the upcoming Budget would translate the vision of the Government into reality.  

At the same time, the Government would need to find ways to manage fiscal balance. External borrowing, strategic disinvestments and public-private participation could be a few options that the Government may explore. There are early signs of private investments returning to India. To sustain this, the government needs to now ensure a stable tax regime which could be the tone of Budget 2022. 

Taxpayers may look forward to an ambitious and balanced budget this year that will proactively tackle the prevailing economic uncertainty.  

Source: www.financialexpress.com/budget/budget-2022-expectations-govt-must-bring-out-sops-as-india-grapples-with-covid-wave-punctured-growth-wheel/2417261/