India Budget 2017 – Pre-Budget Expectations – Tax Rates

Pre-Budget – India Budget 2017

In the India Budget 2016 the Honourable finance Minister Mr.Arun Jaitley had proposed to reduce the Domestic Company – Corporate Tax rates from 30% to 25% gradually year on year @1% per annum. The said relief will benefit only companies. Similar tax relief should have been granted to other kinds to tax payers namely – Individuals, Firms, LLPs (limited liability partnerships). Then it would have brought in equilibrium in the tax cost of various tax payers. This is true, particularly when most of the deductions and exemptions was phased out by Finance Act, 2016 for both corporate and non-corporate assessees. A pro-active step like reducing tax rates would provide a level playing field amongst all forms of business. This would also facilitate ease of doing business in India.

Hence, in the current budget [India Budget 2017] on 1st February 2017, we have to wait and watch if the Finance Minister will grant tax reliefs to non-corporate tax payers by reducing the tax rates on par with the corporate assessees. This would be the least to expect in this budget by a commoner. Further, the reduction in tax rates has been granted to only Domestic companies, however, relief may be granted to all the corporate tax payers.

The tax rate on Dividend Distribution Tax should also have been reduced on par with the corporate tax rates. Such a reduction would be competitive in terms of comprehensive tax burden.

Levy of Surcharge and cess adds to the tax cost. It is appropriate if levy of surcharge and education cess are removed on both corporate and non-corporate tax payers.

Various professionals like Chartered Accountants, Economists etc… have time and again stressed on the requirement to reduce tax rates in India to attract foreign investments and also provide more cash flow in the hands of resident tax payers which would further contribute to the growth of the economy by way of increased spending and capital investment.