What could an ‘aam aadmi’ expect from budget 2016?

central government budget 2016

While everyone is talking about what Finance Minister of the country Arun Jaitley will present in the budget 2016, we too bring for you an overview of the central government budget 2016 which will be released on 29 February. We shall give you an insight on what we think the Government has planned for you this time.

Minister of State for Finance Jayant Sinha while addressing India-Korea Business Summit in New Delhi had said, “We are working hard on the Budget for year 2016-17 that shall be presented on February 29 and that will establish a roadmap for two or three years. We have consistently followed a very clear set of economic policies, we have laid out economic principles very well and we are very confident that we will be able to sustain high growth over a long period of time.”

Arun Jaitley’s team for this budget is lead by Finance Secretary Ratan Watal, DEA Secretary Shaktikanta Das, Revenue Secretary Hasmukh Adhia and Disinvestment Secretary Neeraj Gupta.

finance-minister-arun-jaitley

Finance Minister Arun Jaitley has planned a lot for this year’s budget. The biggest reform, we think, is his promise to the industry in reduction of corporate tax from 30% to 25% over four year’s time. Mr. Jaitley will have to start this process this year itself. But the problem here is that this reduction has to be accompanied with a reduction of exemptions which the industry is getting right now and which is also an integral part of industry’s functioning. But we are sure he has a rescue plan for it too.

After the reduction in the corporate tax, there would be expectations from the individual taxpayers that same kind of reforms should be brought for personal income tax also. So in case of individual taxes, currently one is not eligible to pay tax upto a salary of 2.5 lakh, from 2.5 to 5 lakh one pays 10% tax, from 5 lakh to 10 lakh one pays 20% tax and from 10 lakh onwards income a 30% tax is to be paid of the entire taxable income which is the highest bracket. The major problem is in the highest tax bracket. It has been seen that people suppress their income to be in the lower brackets because this 30% rate, which is the highest rate, kicks in at a very low income of rupees 10 lakh and so the need of raising the income level in the highest tax bracket is a must. We expect the finance minister to bring in a strategy to introduce such a change in the personal tax too, if not this year probably in the next year.

On the expenditure side, there is a big burden on the shoulders of the finance minister and that is of pay commission recommendations. The calculation is that the burden would be around 1.2 lakh crore. There is another burden of one rank one pension scheme. These two are the two major burdens which the government has to bear. This is then a tough time for the economy when the taxes are not growing the way they should and also the economy is not going at a faster pace which has been projected earlier.

Speaking for the budget 2016, the Minister of State for Finance Jayant Sinha said, “We are a pro-poor government but we are pro-market government as well. If competition does not flourish, if market and companies do not flourish, how can we generate economic surplus, the tax revenues that will enable us to eliminate poverty and the government is working on increasing productivity in agriculture.”

On the other hand, the crude oil prices are likely to remain low, so the common man can assume that petroleum rates will remain same or may even go up. Though we expect Mr. Jaitley to provide more funds towards the development of the farmers, labor sector and the middle class, we’d also suggest if you’re a salaried person, don’t expect too much.

Mr Jaitley has outnumbered previously presented budgets with a hopeful light given throughout his speeches and we hope there is something for everyone. The wait ends on 29th February and let us see what’s in store for us.

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