As we approach the Union Budget for FY 2023-24, there are several key areas that are likely to be the focus area for the government. One area of focus is likely to be economic growth and development.
The upcoming Union Budget will be the last full year budget from the Modi government ahead of the Lok Sabha elections due in early 2024. The key expectation from Finance Minister Nirmala Sitharaman is to maintain the growth path while keeping fiscal deficit and inflation in check.
More Incentives To Manufacturing Industry
The upcoming Budget 2023-24 needs to include two important provisions. The first is tax incentive on capital expenditure or operational expenditure for expansion, capacity utilisation and use of new age technology application like Internet of Things (IoT), Artificial Intelligence (AI), Machine Learning (ML), etc.
The second is a reduction in interest for late payment of GST from the current rate of 18 per cent to proposed 12 per cent. This suggestion made by ASSOCHAM (Associated Chambers of Commerce and Industry of India) recently will go a long way in making a level playing field.
Simplified Mechanism To Enforce New Labour Laws
The four labour codes—the Code on Wages, Industrial Relations Code, Social Security Code and the Occupational Safety, Health and Working Conditions Code are set to replace the existing 29 labour laws. Over 90 per cent of India’s 50 crore workers are in the unorganised sector. And through these codes, the government will be able to ensure that all of them enjoy the benefits of labour laws related to minimum wages and social security.
Unfortunately, despite the approval of these codes by the Parliament in 2020, many of the State Governments are yet to adopt the New Labour Codes. The Union Government needs to push the State Governments to implement these codes as soon as possible. Therefore, some simplified mechanism needs to be included in the Budget for FY 2023–24 for the adoption of these codes.
Tax Benefits To Promote Solar Energy
India is the world’s third-largest producer of renewable energy. Yet, the country has a long way to go. Despite a significant push from the Government, solar installation in India has not attained the desired momentum.
Globally, several countries have tried innovative tax exemptions to encourage investment in solar energy. To meet the 2030 solar mission target, the Government needs to provide tax benefits and subsidies for companies installing solar panel plants and for taxpayers installing solar rooftop power systems.
Expectations Of The Salaried Class
The Budget should provide some changes in the income tax structure. The tax rates have not been considered for revision since FY 2017-18. Although a new tax regime was introduced, it has not been adopted by majority of the tax payers due to its unviability as compared to the old tax regime. Thus, in order to leverage more purchasing power and to provide some tax relief the highest tax rate of 30 per cent needs to be reduced to 25 per cent and the threshold limit for the highest tax rate needs to be increased from Rs 10 lakh to Rs 20 lakh.
The ‘middle class’ and the ‘lower middle class’ have been impacted to a large extent due to the impact of Covid-19 for two consecutive years and pursuant to the global inflation and constant revisions in the repo rates. The budget also needs to look at increasing the limit under Section 80C.
The limit under Section 80C may be increased to somewhere between Rs 2 lakh to Rs 2.5 lakh, thereby shifting the paradigm towards savings and an investment-oriented economy. Further, considering the increased rates of medical treatments and medical insurances, the existing limit of Rs 25,000-50,000 under Section 80D needs to be reviewed and increased keeping at par with the inflationary growth.
Expectations Of The Indian Corporates
In present scenario, the tax rates are different for different sectors. In order for India to stand as a manufacturing as well as a services industry hub, the corporates expect that a similarity should be introduced in the tax rates. If the corporate tax rate of 15 per cent is introduced, then India will have one of the most globally competitive corporate tax rates. This will not only strengthen the industrial/manufacturing sector, but will also pave the way for the services sector to grow and outperform.
Amendments In National Pension System (NPS)
Section 36 (1) (iva) provides that deduction shall be allowed to the employer with respect to the contribution made by the employer towards NPS to the extent it does not exceed 10 per cent of the salary of the employee.
Since the contribution of the Central Government towards NPS has increased from 10 per cent to 14 per cent, the consequent changes should be made in Section 36 to bring uniformity between both the sections.
Concessional Tax Regimes For Firms / LLPs
Partnership firms and Limited Liability Partnership (LLPs) are taxable at a flat rate of 30 per cent. The Government had provided concessional/alternate tax system for domestic companies, individuals, hindu undivided families (HUF) and cooperative societies. It is recommended that Government introduce corresponding concessional tax regimes for partnership firms and LLPs.
(The author is Group CFO, Kamdhenu Group — views expressed are personal)
