The anxiety level is quiet high this time as this Budget will be the first Budget after demonetisation and people have high expectations from it.
Experts believe that there are likely to be more of good surprises in this year's Budget due to the upcoming elections and government would like to appease the voters, after giving them the shock of demonetisation. Consumption has been hit after the ban of high currency notes on November 8th and to revive it, government needs to provide some tax sops or incentives to increase the disposable income in the hands of the people.
Having said that lets just look at the positive as well as negative surprises that the Budget 2017 may offer.
1) One of the biggest shock will be if the finance minister proposes to change the definition of long term capital gains of equity. Currently, gains on equities held for more than one year are tax free while 15 per cent tax is levied on less than one year gains. "Although the long-term capital gains (LTCG) may continue to be tax free but the tenure can be increased from one year at present to three years," says D K Aggarwal, Chairman and Managing Director of SMC Investment Advisors. It will have significant impact on the equity market investments, he added.
The whole speculation on the long term capital started after the Prime Minister, Narendra Modi , in his new year eve's speech said that tax collection from capital market participants is low. Markets interpreted it that the government may levy a tax on the LTCG from equity or increase the tenure of LTCG. Manoj Nagpal, CEO, Outlook Asia Capital says, it will be positive surprise for equity investors if LTCG on equity investments is left unchanged.
2) It is widely anticipated that the government will increase the tax slab. The expectation is that the basic exempted income limit for an individual below 60 years will go up to Rs 3 lakh, while many are expecting that it might also go up to Rs 5 lakh. Tanwir Alam, CEO, Fincart says that if the Budget 2017 doesn't provide these tax breaks which are required to boost up the consumption it will be a surprise.
"Personal income tax slabs will be changed. We expect the minimum tax slabs to be increased to Rs 5 lakh, Rs 7.5 lakh, Rs 12.5 lakh from the current Rs 2.5 lakh, Rs 5 lakh and Rs 10 lakh. It will be a big positive surprise for the common man," says Manoj Nagpal, CEO, Outlook Asia Capital.
It will be a surprise if the government doesn't offer any tax break to the home buyers, Alam added further. Currently, a home buyer gets a tax deduction of Rs 2 lakh on the payment made towards interest on home loan repayment. It is expected that the government might increase it by at least Rs 50,000.
3) It will be a positive surprise for a common man if excise rates for petroleum products may be reduced, says Nagpal. Excise duty on crude oil import was increased by the government to compensate for the tax losses as the global oil prices fell to a low of around $30 per barrel. Now, as the prices have risen to around $55 per barrel, it may be possible that the government may reduce the excise duty on crude oil.
4) On a lighter note, Nagpal also expect it will be the longest budget speech ever in history of India as for the first time in history the Union Budget as well as Rail Budget will be presented on the same day while earlier rail budget was presented a day before union budget.