Among the various interesting budget proposals introduced by the Finance Minister today in parliament, certain key considerations were given to the common man and the Micro, Small and Medium Enterprises (MSME) sector.
Some of these are highlighted below:
Boost for the salaried group
Budget 2017 proved the phrase “expect the unexpected” from a personal tax perspective. There was much speculation until the budget day regarding reduction in slab rates and other sops for the salaried class. However, Mr. Jaitley came up with a simple, yet impactful set of proposals to please the common man.
The existing tax rate of 10% for income range between ₹ 2.5 lakh and ₹ 5 lakh has been brought down to 5%, which has cheered many. This, coupled with the existing deduction available under section 80C of the act will ensure that individuals won’t have to pay any income tax up to an income of ₹ 4 lakh. Ironically, we may not know how much of such 80C deductions could be utilised by the low-income group taxpayers, but still the benefit stands, if the qualifying investments are made to avail the deduction under 80C of the act. Further, this budget also simplified the tax filing process as a one pager return for the salaried class up to a taxable income of ₹5 lakh without any business income. There is also the assurance of non-scrutiny in the case of first-time tax filers of the above class as a way to bring more people into the tax office.
The deduction u/s 80CCD towards contribution to NPS has been increased by 20% in respect of self-employed persons from the present 10% which is also a welcome move.
With the use of analytics, the Finance Minister made an interesting observation that the effective tax rate of MSME is much higher than that of larger companies. This,in spite of the fact that these companies contribute immensely towards economic growth and employment generation. To give a big boost to the MSMEs to thrive in a competitive environment, Mr. Jaitley has proposed to reduce the tax rate of MSMEs reporting turnover of less than ₹50 crore to 25% from the existing 30%. He also made an assertion that this benefit covers 96% of the total companies in India that are filing tax returns.
Also, in a drive to promote digital way of doing business, a lower rate of 6% from the existing 8% has been proposed to small companies having turnover less than ₹2 crore to the extent their sale proceeds are realised through banking channels. Similarly, the threshold for mandatory tax audit compliance has been raised to ₹2 crore, which would ease the compliance burden.
All of these measures suggest that with Budget 2017, the government has sought to reward those honest and compliant tax payers – whether the common man or MSMEs – to ensure inclusive growth and development.
Source : http://www.thehindu.com/business/budget/Union-Budget-2017-tax-relief-for-the-common-man-MSMEs/article17142403.ece